In Focus IT Industry – IT Brief

HTEC to ferry Hungarian IT companies into US market
ISTVÁN FÖLDESI LIKES TO REFER TO THE HUNGARIAN TECHNOLOGY CENTER IN VIRGINIA (HTEC) AS A “FERRY BOAT THAT WANTS TO SHIP HUNGARIAN IT COMPANIES FROM THE HUNGARIAN SHORE TO THE US AND FIND A SAFE AND PROSPEROUS HARBOR FOR THEM.” Földesi is the director of HTEC – a government- sponsored IT center set up in October 2003 in Virginia. HTEC’s main goal is to expand Hungary’s technology industry into the US while supporting American market entry for small and medium-sized (SME) Hungarian IT companies. “We assist with regular inquiries from Hungarian IT businesses as well as American IT firms. US companies are still more interested in exporting products and services to Hungary rather than expanding into the local market but the trend may be changing soon,” says Földesi. Since its launch last year, HTEC has worked hard to consolidate cooperation between Hungarian and American IT companies. Although still a long way to go, HTEC’s efforts are being rewarded. Last year, the Hungarian IT Ministry, together with HTEC, created a special tender office in Budapest to select Hungarian IT companies that would use HTEC as an incubator to develop business contacts in the US. According to the ministry’s May 28, 2004 announcement, the HUF 200 million tender was successfully completed. Allocated funds are expected to help Hungarian SMEs make a dent in the US telecom and IT sector. FreeSoft and AITIA were among the companies that won the HTEC tender, collecting the largest sum of HUF 25 million each. The two companies will match the tender with their own funds. Tender provisions grant winners one-and-a-half years to use the funds. AITIA (Artificial Intelligence, Information Technology and Intelligent Agents), a leading provider of various software and telecommunications equipment in Hungary, wants to focus its efforts in Virginia on marketing the company’s speech recognition telephony software. Freesoft sells computer services on the Hungarian market and provides full-scale application software solutions for its customers. In October, AITIA and FreeSoft made an impressive first appearance at the Gartner Symposium (the industry’s largest and most strategic conference) in Orlando, Florida, and started talks with potential American investors. Földesi believes “the support of the Hungarian government adds to the ‘bona fide’ of these companies” and “has made a real difference in the US.” By the same token, the Hungarian government recognizes HTEC’s value in raising the country’s profile and attracting US investment. According to Gábor Tatai, AITIA president, and Vilmos Vaspál, Freesoft CEO, the success of their companies would not have been possible without HTEC. Both executives hope the center will evolve into a long-term business intermediary in the US and that the Hungarian government will continue its support. Marketing is one area where HTEC’s backing is critical. Marketing and communication continues to be an ongoing challenge in Hungarian businesses, especially for SMEs, both in terms of know-how and finances. The majority of medium-sized enterprises in Hungary consider marketing and brand-building strategies a luxury they cannot afford. Marketing “is a costly exercise,” says Földesi. “Hungarian companies we deal with offer excellent products. However, they are mid-size companies and cannot afford expensive marketing campaigns.” One of HTEC’s key roles is to make sure Hungarian newcomers address all available opportunities and reposition themselves for the larger market. In the US market, where competition often hinges more on the intensity and efficiency of communication, HTEC’s is well positioned for the task. The center is a member of the Northern Virginia Technology Center (NVTC) – a membership and trade association for the technology community in northern Virginia with more than 1,100 member companies. Membership includes companies from all sectors of the technology industry and service providers that support those companies. NVTC would participate by helping Hungarian IT firms with networking, marketing and educational events while providing private mentoring and advisory services with the organization’s experts. “As a member of NVTC, our center is in a good position to help Hungarian IT companies launch solid business partnerships in the US,” says Földesi. Hungary is no novice in the IT world. A leading source of highly qualified IT experts, Hungary’s technology enterprises account for a quarter of the country’s industrial output. Over the recent years, Hungarian companies have become reliable outsourcing partners for developing and supporting advanced IT systems. The establishment of R&D and operations centers in Hungary by global heavyweights such as HP, GE, IBM, Siemens, Nokia, Ericsson and Alcoa represents a vote of confidence in the potential of Hungarian IT capabilities and the overall economy. HTEC is Hungary’s first effort to expand its technology industry to the US market.

EUR 12 billion "Silicon Valley" planned outside of Budapest
DEVELOPERS ZSÁMBÉKI-MEDENCE TÉRSÉGFEJLESZTŐ PLAN TO START CONSTRUCTION ON A EUR 12-BILLION SCIENCE CENTER NEAR ZSÁMBÉK, OUTSIDE BUDAPEST, BY THE END OF 2005, COMPANY CEO ZSOLT NAGY TOLD ECONEWS. The center, which Nagy likened to Silicon Valley, is expected to be finished in 20 years. Four Hungarian design firms along with a Dutch and an Irish firm have been picked to submit plans for the project, which will include a campus, an innovation center and technology park. Plans for the 4,500-hectare site will be evaluated in December 2004. The developers aim to get 80% of the EUR 12 billiondevelopment costs from investors and the rest from state support. The project will be eligible for European Union funding once the planning stage has been completed, Nagy said.

Bids called to set up 4G-research center in Hungary
THE IT AND TELECOMMUNICATIONS MINISTRY AND THE NATIONAL OFFICE FOR RESEARCH AND TECHNOLOGY INVITED BIDS TO SET UP AN R&D CENTER FOR FOURTH-GENERATION MOBILE COMMUNICATIONS TECHNOLOGY. Universities with ties to businesses in the sector were eligible to apply through Oct. 25, with the winner announced 30 days later. The winner will get HUF 2 billion in subsidies over the next four years to set up the center. HUF 1.8 billion of the funds will come from the National Office for Research and Technology while the rest will be provided by the IT and Telecommunications Ministry.

Newly listed IT company Freesoft to embark on acquisition-driven growth plan
SHARES OF HUNGARIAN IT COMPANY FREESOFT BEGAN TRADING ON THE BSE SEPT. 22, AND FREESOFT – THE FIRST COMPANY TO CARRY OUT AN IPO ON THE LOCAL BOURSE THIS YEAR. Shares began the first trading day up 10% over the initial subscription price of HUF 1,800 and registered HUF 130 million in turnover during the first two hours of trading. Freesoft closed at 2,080, up 15.6%, at the end of its first trading day, on a respectable turnover of HUF 170 million. "We think that the stock exchange will provide more advantages [besides financing], such as facilitating company acquisitions and improving management incentives," Freesoft Chairman and CEO Vilmos Vaspál said. The IPO brought the company's equity capital up from HUF 1.05 billion to HUF 1.74 billion. The sale price estimates the whole company at HUF 1.89 billion. Freesoft already collected HUF 700 million in fresh capital from investors through an initial public offering in July. The company’s trading in shares on the local stock exchange is part of its acquisition-driven growth strategy. The company entered talks with five or six companies on merging with Freesoft or being acquired by it. During a press conference on the listing of Freesoft’s shares, Vaspál announced the firm was considering negotiating the acquisition of between 20 and 30 IT firms in the longer term. Vaspál expects to see a 30% rise in total revenue this year, with the firm's EBITDA doubling at HUF 249 million. Freesoft sells computer services and provides full-scale application software solutions for its customers. Its clients include the Prime Minister's Office, Budapest Bank Rt., the National Tax Office (Apeh) and Vodafone Hungary Rt. Nearly 25% of Freesoft revenues are generated outside Hungary. The company’s acquisitions plans focus on companies whose products are viable not only at home but abroad.

Cisco and Microsoft team up to boost security
CISCO SYSTEMS INC. AND MICROSOFT CORPORATION ANNOUNCED OCT. 18 THEY WOULD JOIN FORCES TO INTEGRATE THEIR RESPECTIVE SECURITY AND HEALTH ASSURANCE TECHNOLOGIES. "SECURITY IS NOT AN ISLAND. By working with Microsoft, Cisco is again demonstrating its commitment to taking every step possible to provide our customers with the industry's best tools and technologies for network security," said Cisco CEO John Chambers. The main purpose of the partnership is to deliver solutions that will help customers effectively respond to network threats and hostile software. Cisco and Microsoft plan to share information about their technologies in order to devise an approach to solution-compatibility between Cisco’s Network Admissions Control (NAC) and Microsoft’s Network Access Protection (NAP), as well as approaches for providing endpoint security and health-policy compliance when accessing network resources. The next step will entail interoperability efforts between the NAC and NAP architectures in delivering these solutions to customers. Customers will then be able to implement a single coordinated solution by integrating the embedded security capabilities of Cisco's network infrastructure with those of Microsoft's Windows. This collaboration in network security technologies builds on previous successful joint efforts of Cisco and Microsoft in other market segments. Security is the latest extension of this partnership launched when the two companies pooled resources in developing virtual private networks and wireless security. "Safer and assured access to the network is a basic requirement if we are to continue our reliance on technology to support business growth. Having a single consistent way of establishing connectivity is as critical to supporting economic growth via technology as TCP/IP was to the success of the Internet," said Chris Byrnes, senior vice president at META Group, a leading provider of IT research, advisory services and strategic consulting.