The European Information Society Technologies prize aims to reward firms that convert novel ideas and processes into marketable products.
Three prize winners will receive £130,000 each, and 20 other winners will receive prizes of £3,300.
The competition is open to companies in countries across Europe, including the EU countries, Switzerland and Israel.
Past winners include software to help companies interact more efficiently with their customers, a system for multilingual translation and software to enable collaborative work over the web.
"To me this represents the Nobel prize of IT and it is a huge source of pride that we are competing with the best of breed, both in and outside Europe," said Bill O'Riordan, former member of the competition grand jury.
In the first nine years of the competition, the UK has had 20 £3,300 winners and three £130,000 winners.
The prize is organised by the European Council of Applied Sciences and Engineering and is sponsored by the European Commission. Winners will be invited to exhibit their creations at an IT event in the Hague in November.
The deadline for entries is 5 May 2004. For more information, visit the website www.ist-prize.org