Hungary country profile and Hungarian ICT / ITO market profile

1. IT SOURCINGEUROPE Central and Eastern Europe’s Country Profile: Hungary

2. Area: 93,030 km2 Population (est. 2009): 9.906 million Human Development Index (est. 2007): 0.879 GDP/capita (est. 2009): 14,499€ GDP growth rate (est. 2009): -0.26% IT Outsourcing market value (est. 2009) – 274.8€ million GENERAL DATA

3. * Based on the 2009 Legatum Institute estimation PROSPERITY INDEX*

4. PROSPERITY INDEX

6. ICT represents one of the engines of the Hungarian economy, with a relatively high contribution to the country's GDP (around 8%). Although a rather small market, it remains one of the most advanced in Eastern Europe.

7. Most activities are concentrated around the capital city Budapest, where the largest distributors' headquarters can be found.

8. The Hungarian ICT distribution system is dominated by resellers and service companies who account for 40% and 45% of the market share respectively, while ICT manufacturers account for only 5%.

9. The demand in the Hungarian market currently concentrates on desktop and system hosting and operating services, as well as business applications.MARKET TRENDS

12. Hungarian IT services market has reached almost EUR 802 million in Q1 2010, up 21% from 2007, which makes more than 40% of the total IT market value.

13. Hungarian IT market has developed a strong project services segment, which accounts for nearly 60% of the general service offering. Project services market has grown at a 10.7% CAGR in recent months, driven by local and central administration projects and ERP implementation in small and medium enterprise sectors.

14. The end-to-end ITO sector is over-concentrated with top ten market leaders accounting for almost 80% of the market. It makes significant barriers in the way of new market entrants, forcing them to look out for their own niche to survive in the competition. Application hosting is one of such niches. MARKET TRENDS

16. Captive outsourcing (ODC/NDC) is only beginning to gain ground in Hungary’s IT sector.

17. As of January 2010, Hungary’s net wages in all industries, including IT, increased by 12.9% in twelve months, with real wages up 6.1% year on year (Hungary’s Central Statistical Office, 2010). The rising salaries in the national IT market make outsourcing to Hungary a way more expensive than to Ukraine or Poland.MARKET TRENDS

18. THANK YOU by: IT Sourcing Europe Limited 2010 www.itsourcing-europe.com Info(at)itsourcing-europe.com