Hungarian Management Consulting Industry in Highlights of European Trends

1
Hungarian Management Consulting Industry in
Highlights of European Trends
Dr. György Gonda, member of the Board of
VTMSZ FEACO Conference, Budapest 9 November 2006

2
VTMSZ in nutshell

• Founded 1990 (VTMSZ, Association of Management
  Consultants in Hungary)
• FEACO member since 1993, ICMCI member since 1996
• Number of corporate and individual members 54
  190
• Number of consultants at member companies 1300
• Number of CMCs 180
• Turnover of member companies in 2005 125 million
  Euro
• Turnover of the Hungarian MC market in 2005 251
  million Euro (11 growth)
• Contribution to the GDP 0,29
• Growth of GDP in 1995 4,1
• Turnover of corporate members represents about 50
  percent of the domestic MC market

3
Flying together with Europe

• Growth of MC market
  turnover ()
• 
  EUROPE
  HUNGARY
• 1998
  15,0
  14,0
• 1999
  16,0
  16,0
• 2000
  15,5
  15,0
• 2001
  11,5
  7,0
• 2002 -
  2,0
  1,5
• 2003
  3,5
  -2,0
  
• 2004
  3,7
  5,0
• 2005
  14,0 (8,0)
  11,0 (5,0)
• Source FEACO

4
Turnover per business services in 2005

• Total turnover/ Europe 61,6 bn. Euro
• Total turnover / Hungary 251 mill. Euro
• EUROPE ()
  HUNGARY ()
• Business Consulting 42,5
  58,3
• Outsourcing 20,9
  0,8
• Dvpt. and integration 19,0
  4,1
• IT consulting 12,3
  19,0
• Other 5,4
  17,8
• Source FEACO, VTMSZ

5
Turnover per business services in 2004

• BY PREVIOUS GROUPING OF SERVICES ()
• Corporate Strategy
  Services 38,0
• Operations Management
  37,0
• HR Consulting
  21,0
• IT Consulting
  4,0
• Outsourcing
  - !

6
From the company side

• Market share by size of consultancy in Hungary
  in 2005 ()
• SMALL
  35,0 (15,1 in Europe)
• MEDIUM
  10,0 (28,8 in Europe)
• Top 20
  55,0 (56,1 in Europe)
• Average growth rates by size of consultancy in
  Hungary in 2005 ()
• SMALL
  9,8
• MEDIUM
  5,2
• TOP 20
  18,0
• Source VTMSZ

7
Analysis by client industry

• Contribution to turnover in
  2005 ()
• 
  EUROPE HUNGARY
• Industry
  25,1 20,2
• Financial Services 20,5
  17,5
• Public Administration 17,4
  11,5
• Telecom and Media 9,5
  9,5
• Energy and Utilities 8,8
  23,5
• Other
  8,3 11,0
• Transport and Travel 5,4
  3,8
• Wholesale and retail 5,1
  2,3
• Source FEACO, VTMSZ

8
Experiences since joining the EU 1

• business as usual in the Hungarian MC industry,
  no substantial change
• neither Hungarian nor foreign consultants rush
  to work abroad (market,
• language, cultural differences, etc.) non the
  less opening up the markets
• members of VTMSZ were previously EU-compatible
  too (ethical
• standards, CMC, methodologies, client
  management, etc.)
• EU membership means more assignments for legal
  advisers, training
• companies, firms dealing with application and
  tender preparation, not
• for the management consultants
• number of bunglers, doctors of miracle is
  increasing in the profession
• only few MC project cover more than one EU
  country

9
Experiences since joining the EU 2

• few consulting assignments for the EU itself
• income from EU-related consulting assignments in
  Hungary
• is around 1 percent of total, equal the average
  of
• FEACO members
• public procurement procedure is already more
  controlled and trans-
• parent
• In the next 5-8 years we expect good, growing
  market for EU-related consulting since the
  development of the Hungarian business and
  technical infrastructure, SMEs, business
  training, etc. will be co-financed partly by the
  EU. Local consultants provide more support to the
  Hungarian applicants in tendering at the EU. The
  MC industry forecasts boom deriving from the
  National Development Plan 2. too.

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New challenges for VTMSZ and Hungarian MC
industry in the coming years 1

• To get deeply acquainted with the operation and
  regulations of EU
• To establish new, EU-related competences to be
  exported to the future member countries of EU
• To improve the number of consultants with high
  quality competences and skills
• Professional support for universities and
  colleges in teaching and training postgraduate
  consultants
• To improve experience in outsourcing
• To improve outsourcing capacities urgently

11
New challenges for VTMSZ and Hungarian MC
industry in the coming years 2
7. To participate in further improving
transparency and extension of public
procurement 8. To protect the business and
ethical interest of the MC profession against
jugglers 9. To strengthen lobby activity at
domestic and EU institutions 10. To establish
and to operate efficient strategic alliances and
cooperation between consultants and key clients
institutions (e.g. public sector)
12
Forecast and main trends in Hungarian MC industry
and market 1

• 10-12 average growth per year (by the new
  grouping of services) is expected in the turnover
  of Hungarian MC sector between 2006-2010
• Polarization of market between small and large
  consulting firms is expected to continue
• Main drivers of growth - EU-related consulting
  assignments
• -
  public administration and sector
• -
  medium size client enterprises

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Forecast and main trends in Hungarian MC industry
and market 2

• Services with (expected) high demand in the
  coming years
• CRM
• SCM
• outsourcing, sourcing, insourcing
• HRM (performance measurement, assessment and
  management compensation systems retirement
  schemes)
• value chain engineering

14
Forecast and main trends in Hungarian MC industry
and market 3

• Client industries with (expected) substantial
  demand for consulting in the coming years
• public administration and public sector
• financial services
• telecom and media
• energy and utilities
• healthcare
• other services

15
Conclusions

• the Hungarian MC market is matured with high
  quality players, with broadly based
  experience,with sophisticated service and fee
  system
• MC market and industry reflects similar features
  to those of industrialized EU-countries
• after joining the EU in the Hungarian management
  consulting industry business as usual , no
  surprise, no earthquake
• polarization of MC service providers, lack of
  medium size companies, huge competition
• focus on solution consulting and smartconsulting
• demanding clients, quality is first, depressed
  fees
• clients expect from consultants to find new
  profit sources
• VTMSZ accepted new strategy focusing on
  business, ethical and lobby interests of its
  members

16
Questions and answers

• THANK YOU FOR THE ATTENTION