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Hungarian
IT Sector Expects Better Year In 2008
About 33% orders from public sector
by Sandor Laczko
 The information Technology industry last
year had quite a mixed year, but 2008 is expected to be better,”
says Janos Keresztesi,
a member of the board of the Hungarian Association of IT Companies
(IVSz). Although, there are no exact numbers available, yet,
feedback from IVSZ member companies suggest that – compared to
2006 –, there was generally a drop in the volume of sales and
services in this sector. Keresztesi, also CEO of FreeSoft Kft,
estimates this fall to be around 10% in the government sector.
This figure was unsurprising and could have been forcasted at
the beginning of the year. While in 2006, substantial EU funds
were available, these arrived late in 2007 and that strongly
affected the IT industry (that many at IVSz now prefer to call
the info-communication industry) for which the IT sector expects
a better year. “In 2007, the information technology industry
had quite a mixed year but 2008 is expected to be better,” says
Keresztesi. Although, there are no exact numbers available yet,
feedback from IVSz member companies suggest that – compared to
2006 – there was generally a drop in the volume of sales and
services in this sector. Over one third of the orders come from
the government sector. Basically, only domestic resources were
available – enough only for maintenance without much remaining
for new projects. In addition, the general economic situation
also led to businesses carefully managing the expenses. Although,
IVSz prepared a survey of the IT industry in 2007, figures show
the state of affairs in the middle of the year, while in Hungary
much of the income is realized in November and December. “What
you can already see in this survey is a fall in sales. Hardware
sales account for the largest part on this market but its share
fell from 48 to 40% and the software market also decreased by
3-4% – with the possible exception of software development,”
Janos Keresztesi comments. At the same time, he agrees that there
was, however, an increase in the field of exports by the IT sector
but says “it was not the result of an organic development but
was due to the fact that several foreign companies appeared in
Hungary to open development centers here”. A good example is
SAP with hundreds of employees, but one can also mention Microsoft,
IBM or T-systems here. Software developed in such centers count
as exports. On the positive side, the survey finds that the structure
of the domestic IT market is healthy. Having 349 members from
micro ventures to multinational companies, IVSz endeavors to
work hard for the creation of a knowledge-based economy in Hungary.
Established in the early 1990s, it has grown to be perhaps the
most influential organization in the IT industry. The IVSz board
member stresses that “IVSz is not a chamber, it is more than
a lobby group, its primary task is to enforce the common interests
of its members: working for export subsidies, creating training
opportunities to make sure we have the sufficient number of professionals,
or supporting the EU sponsored e-inclusion program recently endorsed
by every Hungarian parliamentary party. We have joined all these
programs and try to make the role of information technologies
as broad as possible.” A good example for the omnipresence of
information technology is the ‘New Hungary’ development program
using EU funds. As one can see in the tender applications, information
technology is no longer a separate chapter but relates to everything.
 “This made us find the role of information technology
in all fields: from agriculture to environmental protection.
There are
some issues where we have to find a common denominator within
IVSz as the interests of certain member companies may contradict
those in others”, he said. One such issue is the patenting
of solutions and methods in software development, which also
caused
division in Europe. Eventually, the EU decided the issue for
both IVSz and Hungary: patenting was not supported, a decision
that favors smaller and medium-sized enterprises. An IVSz team
works hard in the field of simplifying acquisitions and tender
applications. Information security is another important issue.
Keresztesi says “We at IVSz, believe that Hungary is not adequately
prepared in this field. IVSz’s role here is that its members
join forces to make decision-makers realize the huge importance
of this matter.” As for 2008, the IT industry hopes that there
will be more EU funds available. Major projects in the field
of e-government have been accepted already, and in some cases,
even contracts have been signed. It is very likely that actual
work will start in these projects and even income will be generated
this year. However, there are delays in certain areas, especially
in the modernization of IT systems in the different branches
of state administration. However, what about the other factor,
economic growth? The IVSz board member is not that optimistic
about it. “It is very hard to forecast that. I myself don’t see
much of it happening. However, the stimulating effect of international
markets may also a have positive influence in Hungary. The Hungarian
economy is likely to produce more growth this year but, I believe,
not to the extent that could make it a driving force for the
information technology sector. It is especially true for the
part of the state administration that must progress without EU
funds. At the same time, the competitive sphere of the economy
is likely to grow alongside the rate of the international economic
growth.” Sales volume in the Hungarian IT sector in 2006 was
HUF 3,207 billion (USD 1.6 billion). Approximately one third
of the total IT sales occured on the domestic market with the
rest coming from exports. Growing Internet penetration in Hungary
is also helping the blossoming info-communication industry.
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