Already a booming business, the phenomenon of SSCs is expected to provide young Hungarians with employment – and to fuel the local office market – even further in the near future. Firms that locate back-office functions here benefit from the local pool of affordable talent.
Shared service centers in Hungary allow firms to take advantage of the country’s talent pool and cost-effective workforce by grouping business services here. Based on interviews with experts, further increases in the economic significance of this sector can be taken for granted.
“In the last few years in the CEE region, the industry of modern business services has been registering a 15-20% increase of employment each year. In the upcoming years, we expect a dynamic development of the shared service center (SSC) and business process outsourcing (BPO) sector, which is to become one of the main branches of the economies in the CEE region,” reads a recent study by Hays, a leading recruitment firm.
SSCs are set up in order to centralize certain corporate functions of multinational firms in one single service unit; this then serves other in-house departments and external customers with specialized services. The shared services model is growing around the globe, and according to an estimate by professional services firm EY, related revenues were projected to soar worldwide by nearly 12% between 2013 and 2015. For many reasons, Hungary is a destination for SSCs and BPO offices, and the industry is exceptionally strong here.
“The significance of SSCs in Hungary is continuously growing. Currently, there are around 96 of them employing some 36,000. In 2014 alone, eight new such centers were opened,” the Hungarian Investment and Promotion Agency (HIPA) tells the Budapest Business Journal in a statement.
HIPA is actively involved in encouraging this further: It not only initiates regular consultations with the main players in the industry, it also promotes Hungary as an attractive location for investment at its own events and through business diplomacy.
With more than 20 years of sectoral experience, Hungary now belongs to the so-called “mature” locations where SSCs are charged with ever more complex duties. Projects typically brought here from Western Europe or the USA primarily target Budapest, but larger Hungarian university towns in the countryside have been gaining acceptance as well.
British Telecom, which operates one of the largest SSCs in Hungary, has twin offices, one in Budapest and the other in Debrecen. Only last year it expanded its total office space in the two centers by more than 4,000 sqm, while staff went up by 400 to 1,300. The company has been present in Hungary since 1999, and launched its SSC in 2007, so by that time it knew what to expect.
“We had a very good experience with recruiting talented people and building up a successful back office and support teams in the previous years at that time,” Andor Faragó, general manager at BT’s EMEA Regional Operations Center, explains to the BBJ. When selecting the location, the following aspects were also taken into consideration: Labor arbitrage, Hungary being an EU country, legal security, appropriate infrastructure, availability of offices, and the excellent living and working conditions.
Beyond the above considerations, cost-effectiveness normally counts as an additional incentive. As shown in a study by Corvinus University of Budapest, whilst average annual costs of a workstation in Hungary amount to around €3,000, the figure in Western Europe is considerably more than €10,000.
SSCs are particularly attractive to members of Generation Y, who can start an international career without leaving the country. However, well-educated employees with great language skills are of increasingly short supply. A BDO Hungary survey reports that the bulk of SSCs struggle with critical labor shortages and high levels of fluctuation; many younger colleagues will simply switch workplaces if they feel their work is monotonous or they don’t see good career prospects.
General Electric is currently on the hunt for talent in order to fill several hundred vacancies in its Global Operations Center located in the Hungarian capital. General manager Bjorn Bergabo is confident he will be able to find and keep the right people. “Within global operations, employees are part of a broad and globally recognized world-class team. It opens avenues within GE to tailor a career path to match employee aspirations, develop necessary competencies, promote best practice sharing and provide opportunities to grow.”
Nokia Networks, which selected Budapest as its Finance Shared Services (FSS) location in 2004, aims to achieve long-term commitment by relying on strong company values. “Retaining employees needs a multilevel strategy: Attract, engage and develop the best talents. In addition to their competitive benefits package, Nokia Networks employees working in the Hungarian FSS can take cross-functional opportunities and job rotation as well,” a Nokia statement says.
BT’s Faragó emphasizes the importance of maintaining a positive company reputation. “Hungary is a very small market and good news and bad news are spread quickly.” Recruitment takes place via several channels, relying on employee-referrals, PR campaigns, CSR programs and job fairs.
But keeping talent must come from inside. “By keeping our people engaged with various employee programs, internal career opportunities, training and development programs, BT is said to be a ‘great place’ to work at,” Faragó notes. “The result is also visible in the No. 1 place achieved in the Best Employer 2014 survey’s SSC category, or the Family-friendly Workplace Award granted in 2012 and 2014.”
The operation of SSCs is far from static, though. Part of the evolutionary process is becoming evermore multifunctional, where the willingness to innovate is crucial. “GE has been in Hungary for more than 25 years. Our investment in establishing the Global Operations Center in Budapest is another step reflecting our continued commitment to service innovation and growth in the region,” Bergabo says. GE plans to double it 1,000-strong staff as the scope of operation becomes multifunctional.
BT, in turn, already carries out very complex tasks in four large service “towers”, namely FSS, customer service, business administration and support services. “We have 12 different functions providing specific services,” Faragó says.
Innovation efforts mainly concern process improvement. “BT has a special continuous development program based on Lean and Six Sigma principles that are applied in the Hungarian shared services as well, and it delivers outstanding results such as system automations, developed skills, process enhancements and cost reductions. The focus of these improvements is always the customer and how BT can deliver a better service,” the general manager adds.
The odds are exceptionally good that Hungary will see a lot more similar multifunctional business hubs emerging within its borders. And both the economy and the labor market will cheer up as a result.