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 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.

10. New challenges for VTMSZ and Hungarian MC industry in the coming years 1 1.To get deeply acquainted with the operation and regulations of EU 2.To establish new, EU-related competences to be „exported” to the future member countries of EU 3.To improve the number of consultants with high quality competences and skills 4.Professional support for universities and colleges in teaching and training postgraduate consultants 5.To improve experience in outsourcing 6.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

13. 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