Scotland must step up investment in IT skills in order to maintain its innovative edge and support a competitive economy, its trade body for IT and telecoms, ScotlandIS, has warned.

A new report by ScotlandIS, co-funded by IT supplier Cisco, has identified a need to maintain an entrepreneurial culture, which should not be averse to taking risks.

It has also called for long-term government support and investment in education, skills and infrastructure.

ScotlandIS flagged problems including a relatively low level of innovative ICT companies in Scotland, lack of sufficient ICT and innovation skills at board level across the economy, and declining quality and quantity of entrants to university ICT courses.

Increased investment is crucial if Scotland is to keep pace with similar economies, according to Polly Purvis, executive director of ScotlandIS.

"For the first time, we have demonstrated a close correlation between high level ICT skills and innovation," she said.

"Scotland needs to raise its game by focusing on these skills and providing the best environment to nurture this valuable talent and embed it in the heart of Scotland's economy.

"Relying on offshore skills for this is a recipe for disaster. The report's evidence underlines the fact that we cannot rely on offshore ICT skills to drive innovation in Scotland."

Donald McLaughlin, operations director for Cisco in Scotland, said: "As the working population dwindles over the longer term, strong innovation is vital in driving Scotland's economy, but I have grave concerns that we are missing out on this.

"Our economy needs a shot in the arm, and a stronger focus on technical innovation is the tonic it needs."

With the rest of the UK, Scotland is experiencing a massive drop in applications to ICT related undergraduate courses.

In Scotland, IT candidate numbers fell by 49 per cent between 2006 and 2001, and according to e-skills UK, graduates make up 48 per cent of Scotland's IT sector.