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. Foreign software companies have also moved into the market, hoping to benefit from the fact that many systems integrators have prior working relationships with network operators and also know the operators' business needs. 'There's a lot of Irish companies now that have packages and they look for distributors that can sell those to operators,' Mr Watts said. Guangdong Yixun, Datang, Wholerise, Powerwise, Longshine and Beijing Slate are also in the Boss market, but work almost exclusively with only one network. Comparing China's operators with foreign network operators, Norson said the Chinese firms spend a much lower portion of their revenues on Boss software, while North American operators re-invested about 2 per cent of revenues in this area. Norson said spending on equipment had dropped in the first half of this year, with the largest networks spending about 31.5 billion yuan in total, compared with 129.6 billion yuan for all of last year. This included orders from China Telecom, China Netcom, China Mobile, China Unicom and China Railcom. The drop reflected more caution by operators as well as better prices being achieved through bulk purchases. 'They are buying larger-scale purchases, which tends to push prices down,' Mr Watts said. Norson's full-year 160 billion yuan investment forecast includes non-equipment costs such as digging up roads. Spending had slowed the most at China Telecom and China Netcom, hurting domestic vendors more, while the foreign players catering to the mobile industry had been less affected, Mr Watts said. Despite the fall in spending, China continues to add just under five million fixed-line subscribers and five million mobile subscribers per month, making it relatively more attractive than developed markets such as Europe and North America.