The last Executive Club of the Hungarian Outsourcing Associiation took place on 28 November. The presentations gave insight into the invited (top) executives about the competitiveness of the Hungarian workforce, the productivity race of the digital era and the opportunities and challenges associated with these.
The report published by McKinsey in September revealed that the expected compound average growth rate of outsourcing knowledge intensive activities by 2019 is 23% and the size of the global market will exceed 50 billion. Between 2008 and 2015 in central eastern europe the shared services sector grew 17%. In the beginning outsourcing of the traditional activities dominated (IT helpdesk, accounting transactions etc.) followed by the more complex transactional activities (remote IT management, procurement etc.).
The next big growth wave can be led by the outsourcing of knowledge intensive activities (risk management, R&D etc.) that can lead to a larger number of center of competences (CoC) establishments. This would be in line with the strategy of the Hungarian Government that will focus in the coming few years on how to attract R&D activities to Hungary. According to this report Hungary is one of the most matured shared services hubs in the region, yet it is also stated that Poland and Czech Republic are strong competitors. From the aspect of CoC Hungary’s competitive advantage is that it has the highest ratio of captive shared service centers (78%) that serve their parent companies (CEE average is 48%). Companies will find it easier to outsource critical and sensitive activities to their own subsidiaries than to external vendors.
So we can conclude that the market environment is favourable and slowing down of the dynamic growth in the coming years due to economic reason is not likely.
It is unclear yet how fast and how much the incentive system promoting job creation and FDI will be restructured to an extent that it promotes quality of created jobs over quantity and also reflects the sector preference of the government. (Both Czech Republic and Poland already have that in place)
The current incentive system tries to solve the issue that the young people entering into the workforce after school still need to be trained by the employers to reach full productivity level. This education process could be accelerated by the dual education system and modifying it to include students in the higher level of education institutes.
It will also be an important question if the migration of young people to the west will stop if they can get positions in Hungary that they would have no chance to get abroad.