Proposals to aid indigenous software companies achieve the scale needed to compete internationally were released yesterday.

A survey conducted by the Irish Software Association (ISA) found that many indigenous companies are small and experiencing difficulty in achieving the growth they require.

"Only 10 per cent of the companies surveyed have annual revenues of €10 million or more and half of all companies surveyed have revenues of less than €2 million," the association said.

The sector employs 16,000 and could employ more than three times that by 2010 if nurtured properly, the association said.

The ISA recommendations include: the creation of a leadership development programme; the development of incentives for successful entrepreneurs to become involved in high-risk start-ups; changes to the capital gains tax system to encourage more early-stage funding; and increased examination of the commercial potential of college campus research.

The survey found that two out of three of the companies surveyed were founded by people with technical knowledge. Too many company leaders were lacking in business management skills, the association said.

The survey also found that the responsibilities that directors have to take on board made it more difficult to attract high-calibre non-executive directors.

There was a need for more "angel" finance for companies in the earlier stages, so that venture capitalists could make fewer but larger investments in more highly developed companies.

Also, more use of channel partners to grow revenue is required, the association said. Internationally, software companies generated 40 per cent of sales through partners, but the survey found Irish companies only generated 10 per cent of sales in this way.