SPECIALITIES OF MANAGEMENT CONSULTING

IN NEWLY JOINED AND CANDIDATE COUNTRIES

by Janko ARAH

BUDAPEST, NOVEMBER 9th, 2006

Newly Joined and Candidate CountriesNewly Joined Countries:

Estonia, Lithuania, Latvia, Poland, Czech Republic, Slovakia, Hungary,Slovenia, Malta and Cyprus (8 new members are bordering Western Europe)

Candidate Countries:

Bulgaria, Romania, Croatia and Turkey

There are 8 members (out of 24) in FEACO from Newly Joined and Candidate Countries:

• Bulgaria (BAMCO)• Croatia (UPS – AMC)• Cyprus (CYBCA)• Czech Republic (APP)• Hungary (VTMSZ)• Poland (SDG)• Romania (AMCOR)• Slovenia (AMCOS)

GDP per capita in PPS(EU-25: 100 – 17.900 euros)

Source: Eurostat

60,152,1

47,249,8

73,8

5561,4

80,6

69,5

83,3

32,134,7

48,8

30,7

0

10

20

30

40

50

60

70

80

90

Est

onia

Lith

uania

Latv

ia

Pola

nd

Cze

ch R

Slo

vaki

a

Hungary

Slo

venia

Malta

Cyp

rus

Bulg

aria

Rom

ania

Cro

atia

Turk

ey

Niz1

Real GDP growth in 2005

• Source: International Risk & Payment Review, October 2006

9,8

7,5

10,4

3,5

6,1 6,1

4,3 3,9

2,3

3,8

5,55

4,3

7,4

0

2

4

6

8

10

12

Niz1

Inflation, annual ave. in 2005

• Source: International Risk & Payment Review, October 2006

4,1

2,7

6,9

2,2 1,92,7

3,8

2,5 2,52

5

9

3,3

7,7

0

1

2

3

4

5

6

7

8

9

10

Est

onia

Lith

uania

Latv

ia

Pola

nd

Cze

ch R

Slo

vaki

a

Hungary

Slo

venia

Malta

Cyp

rus

Bulg

aria

Rom

ania

Cro

atia

Turk

ey

Niz1

Unemployment in % in 2005

0

8,36,9

17,8

7,9

16,2

6,5

10,2

7,3

3,4

10,1

5,8

17,8

9,5

0

2

4

6

8

10

12

14

16

18

20

Est

onia

Lith

uania

Latv

ia

Pola

nd

Cze

ch R

Slo

vaki

a

Hungary

Slo

venia

Malta

Cyp

rus

Bulg

aria

Rom

ania

Cro

atia

Turk

ey

Niz1

•Source: International Risk & Payment Review, October 2006

The European MC-Market Composition by Country/Region, 2005 in %

Source: Feaco 2006

38,9

27,5

9,7

4,7 4 3,7 3,5 2,65,6

0

510

1520

2530

3540

45

Niz1

Estonia – some general information on MC

- leading country in the Baltic region, small c. & market

- culture for consulting is very young, no clear market leader

- 3 sectors in MC:- big companies (KPMG, PWC, E&Y and D&T) - local companies: technical oriented, young staff, MC mainly for export- many individuals (hard to find clients, strong competition)

- ECA was established in 1992; has 35 members

- accepted as a partner by governmental institutions

Latvia - some general information on MC- Association of Business Consultants - founded in 1995 and

has 67 members - association's members services are HR management,

economy, marketing, organisation's management, IT, legal services, production and technology

- main goals of LBKA- Latvian MC market trends- current activities of LBKA

- implementation of CMC standards- elaboration of training programs- involvement in common EU projects

Slovakia - some general information on MC

- MC manage their Slovak operations from Prague- small private companies, specialized agencies, banks,

broker firms, investment companies, foreign trade organizations, different information centers, trade and industrial chamber, and some of the universities

- small and start-up businesses represent a specific area of MC

- National Agency for Development of Small and Medium Enterprises (NADSME), the network of Business Innovation Centers (BIC) and Regional Advisory and Information Centers (RAIC)

Comparison of Management Consulting in Selected Markets

TurnoverMC Market GDP Pop.

in MC* Growth Growth in mio.

Poland 240 (300) 10,0% (30) 3,5% (5,6) 38Czeck R 390 (400) 2,9% (4) 6,1% (3,7) 10Hungary 251 (226) 11,0% (5) 4,3% (3,9) 10Slovenia 120 ( 90) 8,9% (10) 3,9% (4,6) 2Romania 200 (107) 20,0% (35) 5,0% (8,1) 22Bulgaria 56 ( 56) - (7) 5,5% (5,3) 7* In mio EURO in 2005 and (2004)Source: Feaco, Survey 2005-2006

Key Figures of Selected European MC-Markets, 2005 (2004)

Country Turnover per

Consultant (EUR)

Czech R 46,791 (50.000)

Hungary 55,134 (65.000)

Slovenia 57,554 (65.000)

Poland 24.000 ( - )

Romania - (50,000)

Bulgaria 20,000 (20.000)

Specialities in MC

- 97,4% of the 61,6 billion Euro MC turnover in Europe was generated within the Western-European countries and 2,6% in CEE in 2005

- MC has developed significantly

- typical daily fees: 100 – 1.300 EUR

- potential growth rate varies between 2,9 – 20 % (4 - 35 % in 2004)

- MC can be optimistic about the future

- the importance of reliable local partners will increase, due to language barriers, to the knowledge of the local business culture and to local client contacts

- privatisation and public market projects- private sector and services such as business strategy,

organisation development, human resources and IT consulting

- clients seek not only advice, but implementation and operation services as well

- speed, quality and value added, comprehensive solutions are going to be of key importance

- outsourcing - a key driver of the industry development

Outsourcing:

- from invoicing to advanced research and development

- Accenture, Capgemini, IBM- some multinationals, like Lufthansa, General Electric... - economic benefit - capital involved - CEE cannot compete with China or India on wage

rates, but it has other advantages:- broad knowledge of European languages- for call centres, it is better to have them in the same time zone, to enable them to respond quickly- geographic proximity

Specialities of MC in Slovenia

- pro-active promotion activities (awards)- Networking; Consulting cluster- Relation to national government- Changes in top managements- SME’s looking for strategies and HR

- Local communities (consortium for development funds, EU projects etc.)

Czech Republik Management Consulting Market by Service Line (390 mio euros)

OUT; 21,0

BC; 29,0

IT; 35,0

D&I; 7,5

OS; 21,0

Source: FEACO

Hungary Management Consulting Market by Service Line (251 mio euros)

Source: FEACO

OUT; 0,8

BC; 58,3IT; 19

D&I; 4,1

OS; 17,8

Slovenia Management Consulting Market by Service Line (120 mio euros)

OUT; 2,0

BC; 75,0

IT; 3,0

D&I; 12,0

OS; 8,0

Source: FEACO

Romania Management Consulting Market by Service Line (200 mio euros)

Source: FEACO

IT; 15

BC; 35

D&I; 5

OUT; 5

OS; 40

Bulgaria Management Consulting Market by Service Line (56 mio euros)

Outsourcing5%

HR24%

Strategy31%

IT10%

OM30%

Source: FEACO

Daily Effective CEE Partner/Manager Fee Rates – Contrasting Countries & Firm Size

0

200

400

600

800

1000

1200

1400

Hungary Romania Slovenia

Da

ily E

ffe

cti

ve

Da

y R

ate

(E

UR

)

Top 40 Consultancy Medium & Small Consultancy

Daily Effective CEE Senior Consultant Fee Rates – Contrasting Countries & Firm Size

0

100

200

300

400

500

600

700

800

900

Hungary Romania Slovenia

Da

ily E

ffe

cti

ve

Da

y R

ate

(E

UR

)

Top 40 Consultancy Medium & Small Consultancy

Daily Effective CEE Consultant Fee Rates – Contrasting Countries & Firm Size

0

100

200

300

400

500

600

700

Hungary Romania Slovenia

Da

ily E

ffe

cti

ve

Da

y R

ate

(E

UR

)

Top 40 Consultancy Medium & Small Consultancy

feaco forward programme2006-2008

Establishment of a clear operational framework

Development of prospectus Once a year ExCo meeting in one of the

countries Promote the temporary placement of staff

member of CEC association in large WE association

Have ExCo representative at each medium/large scale event organised by National Associations

Thanks

for your attention.