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SSCs eye Expansion in Hungary

Shared Services Centers (SSCs) in Hungary appear to be enjoying life here and are planning to further expand in what is the second largest market for SSCs in the Central Eastern Europe region. The Budapest Business Journal discusses the latest trends with Eszter Lukács, senior manager at Deloitte, based on the firm’s first survey into the field.

Eszter Lukács, senior manager at Deloitte.

Hungary is strongly considered an attractive place for doing SSC business, chiefly due to the manpower here: Highly qualified professionals with strong technical capabilities and good service mentality. What is more, “the cost of highly qualified workforce is still relatively low compared to Western countries and not more expensive than their peers in Asia”, Lukács points out. The fresh graduates also possess excellent language skills and high capabilities, offering a great arena for bringing complex and high value-added activities to the country.

“Simultaneously, the legal and economic environment is stable and the government and educational institutions are open to cooperate with shared services companies to get the most value out of their operations in Hungary for all parties,” Lukács stresses.  

In a bit more than a decade, the shared services sector in the country has grown into one of the largest employers, and observing recent trends, its size is expected to grow further. Currently, the field offers employment to more than 42,000, according to the Deloitte survey, citing data from the Hungarian Investment Promotion Agency (HIPA). While new companies are still establishing centers in Hungary, businesses already here are also planning for significant growth. 

Migration of Processes

Additionally, new acquisitions and mergers of the parent company may also drive expansion. New lines of business are also often incorporated into the existing shared services organizations and the current trend shows a move toward the insourcing of previously outsourced activities,” Lukács says.

According to Deloitte’s “Hungarian SSC Survey”, almost  83% of respondents plan to expand their operations in Budapest, while 17% said they are looking to expand outside the capital. Therefore, a collaborative approach from the government, local municipalities and educational institutions, along with further infrastructural developments, are key factors in the further growth of this sector, Deloitte says.  

Deloitte expects the sector to become a chief driver for FDI in the upcoming years. “Several large multinational enterprises have recently chosen Hungary as a location for their shared services center, such as Flowserve, BlackRock, and FrieslandCampina, and existing ones are opening new locations in Hungary. This means trust has been built for Hungary and a sign for it is that currently there are several ongoing location selection projects. We can see that the coordinated and focused approach on these firms, with special attention to their needs, is there for all related players: i.e. local governments, the state government, educational institutions, professional associations and chambers,” notes Lukács.  

Just like virtually every other field of business in Hungary right now, recruiting and retaining talent are key challenges. “To address these challenges, leveraging the tools of employer branding is a strategy that many of the Hungarian shared services centers have already applied,” Lukács says. “To become highly visible and highly attractive, they are investing funds and energy into developing their brand as employers both externally on the talent market and internally towards their employees.” 

Value-added Support

Additionally, the latest trends are signaling that SSCs appear to be transitioning transactional and repetitive tasks to low-cost locations, while bringing complex, high value-added support activities to Hungary, such as financial controlling, FP&A (financial planning and analysis), product development, R&D, and treasury functions.

“These high-quality tasks can provide an added incentive to employees and also allow for further professional development, which is going to turn shared services into an even more attractive career,” she adds.  

In the short-term, Deloitte expects the sector to shift to even more high value-added tasks and high-end automation with the help of robotics, while in the long run further automation tools like cognitive solutions and artificial intelligence could be leveraged.  

“There is also a tendency to move towards centralized governance structures and the development of regional shared services portfolios. In order to correspond to the needs of the new generations such as the Millennials, a cultural change is also expected, where atypical working methods are going to spread and virtual teams are going to be formed on a regional or even global level,” Lukács forecasts.  

Along with a surfacing need for industry-wide cooperation in order to protect the common interests of the sector, SSCs appear to be building the “workplace of the future”, with special attention paid to establishing a creative, inspiring and cozy environment where “focus on delivery” is the basic work management guideline, the Deloitte survey finds.