"The success of the software industry has been to establish India as a form of cheap labour source," said R. Ravisankar, chief of International Business, Iflex Solutions, an Indian software product maker.

"That is a fundamental drawback we have established for ourselves. We have sold ourselves short," Ravisankar told delegates at India's first conference on Product and Embedded Software.

India is home to a series of top quality certified software firms such as Tata Consultancy Services, Infosys, Wipro and Satyam.

Ravisankar said that if "Indian software is 95 percent better than anywhere else in the world then this must be the only top quality product in the world which sells at a lower cost.

"Why should we do that? We have managed to get the quality certifications from the US and use that to sell services at low cost," he said.

Ravisankar said the Indian software industry's revenues lagged way behind technology companies such as Microsoft.

"The Indian software industry is an unqualified success story but when one compares it with large global software companies, an industry which consists of 5,000 companies is dwarfed by one single company -- Microsoft -- almost by a factor of two," he said.

Last year Microsoft's revenues stood at 32 billion dollars compared to the Indian software industry's combined sales of 16.5 billion dollars, with exports rising 26.3 percent to 9.5 billion dollars in the year to March.

"Clearly, we should look at the opportunities we are missing," Ravisankar said.

Based on the largest pool of English-speaking graduates outside the United States and programmers who work for one-tenth the salary of a US professional, India has emerged as a software powerhouse.

For a global standard software firm such as Microsoft, SAP or Oracle the average revenue per engineer is upwards of 200,000 dollars while for Indian software companies it is 42,252, Ravisankar said.

"This is a fraction of what is being achieved by global companies. An opportunity is being missed here as one cannot scale up," he said.

"Business models which look at services only as the main growth proposition face significant challenges today such as growing backlash and visa regulations.

"You do not want a situation where an entire industry gets nervous when some regulator in the US catches a cold," he said.

The United States is mulling legislation to curb outsourcing and has cut down the number of IT visas from 195,000 a year to 65,000.

He said Indian companies were undercutting each other to stay afloat in the US market, which accounts for more than 60 percent of India's software exports.

"We are buying growth at the cost of margins," Ravisankar said.

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