High-tech Hungarians forge 'Silicon East'

A STRONG TRADITION OF EDUCATION IN MATH AND SCIENCE PAYS OFF FOR A FORMER COMMUNIST COUNTRY

When Gbor Bojr pawned his wife's jewelry and smuggled four Applecomputers across the Hungarian border to create his own software firm in the early 1980s, he didn't realizehe'd be part of a revolution in Hungarian industry.

Twenty years later, his firm, Graphisoft, stands as one of the world's top five companies making computer-aided design (CAD) software for architects. It represents a growing number of Hungarian firms turning this post-Communist country into what many are now calling a "Silicon East" - the high-tech center of Eastern Europe.

"I'm actually surprised it has taken so long for Hungary to become recognized," says Mr. Bojr. His firm boasts subsidiaries in 12 countries and a slick office campus that seems transported from Silicon Valley itself. "Hungary has talent and respect for math and science that goes back centuries," he says.

As Eastern European countries struggle to rebuild their economies following the collapse of communism, perhaps no other country in the region can claim as many successful high-tech firms or as much foreign high-tech investment.

Taking advantage of Hungary's low wages, well-developed infrastructure, and an abundance of talent stemming from an educational system that emphasizes math and science, multinational firms have invested hundreds of millions of dollars in research, development, and manufacturing facilities in Hungary. Local start-up firms, meanwhile, have started to have an impact on world markets.

Mobile-telephone manufacturers Ericsson, Nokia, Motorola, and Siemens have all built major research and development facilities in Hungary. In Nokia's case, it is the largest R&D facility outside its Finnish headquarters.

"You cannot make a difference between the quality of the Hungarian or American engineering teams, but the cost is dramatically different," says kos Reszler, head of Recognita, a leading producer of optical character recognition (OCR) software in Europe. "In California, the better software engineers earn between $80,000 and $120,000 per year, and here I can pay around $30,000."

Perhaps more telling of Hungary's new status is the success of its local high-tech firms, which had been held back by a lack of capital. Cygron, a firm focused on artificial-intelligence software - which helps computers learn, reason, and make decisions - struggled with only three full-time employees and about $40,000 in revenues until 1998.

It was then that San Jose, Calif.-based MindMaker purchased Cygron for less than $2 million, boosted the employee base to 33, and quickly began marketing its Data-Scope software worldwide. Last year, Cygron won the prestigious Best of COMDEX Award, at the Las Vegas trade show of the same name.

"We acquired Cygron and a year and a half later, it is worth between $20 [million] and $40 million.... There are a lot of companies like this," says MindMaker founder and CEO Jzsef Kirly. A Hungarian, Mr. Kirly, returned to invest in Hungary after working for most of the 1990s in California.

The success of such firms is no surprise to Hungarians, who point to a list of scientific notables that is far out of proportion to their population of 10 million. That list includes Andy Grove, who fled Communist rule in 1956 and went on to found computer-chip giant Intel. Hungarian-born mathematician John von Neumann, meanwhile, is an migr credited with inventing the computer in the US through his work in the 1940s and 1950s.

Graphisoft's Bojr theorizes that talented Hungarian minds had to delve into areas like math and science that could be explored locally and in private, because the country has been dominated by foreign powers and cut off from major trading routes through most of its history.

"It used to be that if a Hungarian wanted to exploit his talents, he had to move to Vienna or Munich, and hope to get a job at Siemens," Bojr says. "Now, two revolutions in computer technology - the personal computer and the Internet - mean that the barriers no longer exist and we don't have to leave the country."

He recalls that Siemens used to employ hundreds of Hungarian programmers in Germany as early as the 1970s. And executives in Hungary say that many of the country's most talented programmers are still leaving.

"The situation is much like it is with Indians," another big source of labor in California's Silicon Valley, says MindMaker CEO Kirly. But there is a crucial difference between the two countries: "Most of the firms that start offices in India are not really doing critical development there. They will just use that office as a headhunting pod" because of India's poor data-protection laws, he says.

The success of Hungary as a programming center could bring a reversal of the brain drain that has sapped the country of some of its greatest talents through most of the 20th century, Kirly adds. "I think you are going to see a lot of Hungarians going back and starting their own businesses. This is going to be very good for the country."

(c) Copyright 2000. The Christian Science Publishing Society