China's largest telecommunications networks will spend more than six billion yuan (about HK$5.62 billion) this year on software to connect their back-end systems to their customers and to streamline operations.
The figure, reported on Monday by Norson, a Beijing-based consultancy, is only a small percentage of the 160 billion yuan that China's operators are expected to spend on their networks this year. However, it was significant enough to have created a new industry for systems integrators that were finding it hard to survive on hardware sales alone as margins have shrunk, Norson's client relations director Craig Watts said.
Norson expected business and operating support systems (Boss) spending to reach about two billion yuan at China Mobile this year, while fixed-line operator China Telecom would invest three billion yuan and China Unicom about one billion yuan. The software would include network management, billing and customer service systems.
China Netcom was said to be looking at similar products, but these three networks accounted for much of the telecoms investment in the mainland, Mr Watts said.
Norson named AsiaInfo, Digital China and Si-Tech as some of the largest systems integrators moving into the Boss space. Many of them have been left without choice as network equipment manufacturers have begun negotiating prices directly with operator customers, reducing the margins integrators could make.
'It's harder for systems integrators to take a margin on hardware because the prices are more transparent. This is their only real chance to survive the shake-out in pricing. They've got to develop new lines that Ericsson and Nokia don't have and won't compete with them on,' Mr Watts said.
AsiaInfo, a Nasdaq-listed, Beijing-based company, has moved into this area through its acquisition of Shenzhen-based software maker Bonson. Others are doing it through in-house development or partnership with software companies. Hong Kong-listed Digital China linked up with Chinese University of Science and Technology-backed mobile billing company Qingtian.