The opportunities for investment in the IT-ITeS space are changing and attention is shifting from the older, plain vanilla IT services to ITeS or business process outsourcing.

But within the BPO space also there is a change. The call centre business has matured and VCs are rapidly exiting in favour of private equity partners.

The real new opportunity for VCs today is transaction processing. But there is a juicy sub-set within that too -- companies with an India-US profile.

"On the services side, companies are capital intensive and there are no 10-year windows available any more to create an Infosys or Wipro. From a VC perspective, the most important points that attract funding include a business model with reasonably high returns and also companies targeting markets with the potential for large returns," says K P Balraj, managing director, WestBridge Capital Partners.

WestBridge currently manages a $140 million fund. Its investors include Goldman Sachs, SUN Technology and Capital Z Investments. About 80 per cent of the companies in the WestBridge portfolio are service-oriented, while the rest are technology-oriented, especially in the enterprise software space.

But that is history. The new opportunity is transaction processing, higher value work done by BPO companies in India. WestBridge feels that specialised BPOs which, have begun to provide solutions in niche sectors hold the key.

"Service to niche sectors is a fast emerging space. Growth is occurring for services such as back office processing, claims processing, and HR and financial transaction processing.

"The kind of services being offered are those that are higher up the value chain. It has moved from simple processes and commodity services towards transformational services involving complex processes and core business functions," he added.

This kind of work has commenced but is essentially being done in small scale, far from anything like the potential level. The real winners of tomorrow in this space are companies with an India-US perspective.

The US presence is needed to raise the comfort level of companies hesitantly trying out outsourcing. US companies outsourcing within the US is itself a relatively new phenomenon. Offshoring requires another leap of faith.

A US company can comfortably outsource to another with a good US front office and leave it to the BPO company to offshore a part of the work to their own facilities wherever.

The India connection comes in here. It helps to set up the India centre and manage it efficiently. This combination makes both for effective marketing and keeps costs low. WNS, HCL BPO and vCustomer are examples of this.

To illustrate his point Balraj cites the example of marketRX, a new Jersey-based software product and services firm. Last year, WestBridge, along with marquee investors from the life sciences, technology and financial services industries, announced an investment of $10.25 million in the firm.

marketRx is a leading provider of sales force effectiveness and marketing effectiveness solutions to pharmaceutical companies. As part of its plans it will access India in two ways: it will assist pharma companies and also outsource its own activities.

"The common link between all our portfolio companies is that a part of their co-founding teams has an India-US perspective," Balraj explains.

WestBridge feels that vertical industries such as healthcare are expressing a particular interest in procuring high-end BPO services from providers who have strong synergies with the clients' core competencies.