The Irish software industry is on target to double employment in the sector to 40,000 by 2002. Since 1998 the industry has shifted from third to second position as the biggest internationally-traded sector in Ireland after food.

However, the chairwoman of the Irish Software Association (ISA), Ms Mary Cryan, has warned against complacency and has urged the Government to continue to devise innovative policies to boost the supply of people into the industry.

Ms Cryan, who is about to stand down after two years in the post, said: "If it does not continue to invest in increasing available skills, wage inflation will drive software work and jobs overseas, to the detriment of the entire industry.

"Indigenous companies will be less competitive in selling overseas, and multinationals will simply move to the lowest cost base. Without the skills we cannot fulfil Ireland's vision of being e-commerce hub of Europe," Ms Cryan said.

The ISA estimates an additional 5,200 people have joined the software industry - bringing employment numbers to 22,000 - since the publication last year of a strategy document commissioned by it on the State's skills shortage.

Venture capital investment has more than trebled in the past year, and the ISA's call for £100 million (€127 million) in venture capital funding has already been exceeded. Much of this capital is coming from private equity and international investors, as well as home-based venture capital funds.

Ms Cryan warned that despite a buoyant software industry, it cannot afford to be merely an "average performer" in research and development. "We must see it as a means to securing competitive advantage. The future of the industry is totally dependent on its ability to innovate. The Department of Enterprise, Trade and Employment needs to support R & D investment after April, when the present round of structural funds is complete."

Ms Cryan paid tribute to the Department of Enterprise, Trade and Employment and the various government agencies, which she described as "unbelievable" in their support of the industry and the association.

According to industry sources, Mr Gerry Jones, managing director of International Test Technologies, is most likely to succeed Ms Cryan as ISA chairman. This is subject to ratification at the ISA's a.g.m. on Tuesday.

Ms Cryan now plans to write a book about launching high-tech companies into the US market.