Venture capital and private equity investments in the information technology services industry are on a rebound. These had focused for the past couple of years primarily on business process outsourcing companies.

However, investments in the first quarter of 2005 for IT services alone have already topped $50 million versus $47 million in the entire calendar year 2004.

The figures don't quite tell the story of how remarkable this is because just four investments were made in the IT services industry last year -- Americorps' $19.5 million investment in Mascon Global, IFC's $11.25 million in CMS Computers, Carlyle's $10 million in theChennai-based FSS and the Singapore-based WhiteRock Partners' $6 million investment in the Bangalore-based Infinite Computers.

In the first quarter of 2005, in contrast, CVC invested $55 million in Caritor, Lehman Brothers put $8 million into KPIT Cummins, the US-based Seven Hill Capital sunk under $ 1 million in Innosoft and 0iLabs picked up more equity in MegaSoft.

Says Arun Natarajan of TSJ Media, which tracks the venture capital and private equity market: "The cumulative amount has exceeded $50 million, which is more than all the transactions in this space last year."

According to Natrajan, BPO deals did dominate the investment scenario in the past couple of years. In 2003, 22 BPO deals for $160 million were struck. This number declined in 2004, but the value of the deals amounted to $150 million. A notable investment in 2003 was Lee Putnam Ventures' investment of $20 million in Symphony Services.

Says an industry observer: "Two factors are evident here. Firstly, the decline in the number of BPO deals last year does not imply that investment in the BPO sector has dried up. It just indicates that the investments in BPO have become biased towards companies, which are specialised and have established services like ICICI OneSource, OfficeTiger and Newgen."