An erstwhile CEO of an Indian BPO company joins a large private-equity firm, as the head of BPO investments. His firm, of course, expects him to build a portfolio of BPO firms. That is anything but unusual, considering that BPO is one of the hottest growth areas. As the head of an India-based company, he would have an in-depth understanding of not only the booming business of BPO, but also the most important hunting ground for potential investment.

But the role of Akshaya Bhargava, the ex-CEO of BPO firm, Progeon, who now heads BPO investments at the U.K.-based private-equity firm, 3i, is far more than that. He is now closely looking at the portfolio companies of his firm to find out how they can better leverage outsourcing.

Bhargava’s is not an isolated case. One of the largest private-equity firms in the U.S.A., with significant investments in the outsourcing segment, now links its funding with the offshoring plans of potential clients, in all early stage investments. What is more, it often earmarks a portion of the capital to offshoring-related expenditure. In the Valley, most VCs now expect technology startups — especially in areas like commercial software, telecommunication technologies and semiconductors — to have an offshore strategy.

While preaching outsourcing mantras to their portfolio companies proactively, private-equity firms have been equally aggressive in their investments in outsourcing companies. Though the investments have been of moderate size till now, their targets are being set much higher — on complete buyouts of listed Big Six firms like CSC and ACS.

The importance of the segment can be elucidated from the manner in which these firms are attracting ex-honchos from the outsourcing industry including the likes of Vivek Paul, ex-Vice Chairman of Wipro, now a Partner at Texas-Pacific and Michael Marks, ex-CEO of Flextronics, who has joined Kohlberg Kravis Roberts & Co., better known as KKR.

The private-equity firms’ aggressive strategy in the outsourcing arena has reached such a level that many term it as “outsourcing activism.” In reality, it just reinstates one fact — that outsourcing is today the fastest route to value creation. Faster value creation is the raison d’etre for private equity as a business.

Not all are happy about this new aggression, though. Equity analysts, in particular, have questioned the virtues of the private-equity firms’ bid for taking listed companies private, dubbing the tendency a sort of anti-thesis of capitalism — which directly challenges the authority of the stock market.

This opinion, one feels, is a little too harsh. Private-equity firms are not here to replace the stock market system. In fact, the stock markets and the private-equity ecosystems are interdependent. Private-equity firms just act as a stabilizing factor in the equity market.

Democracies, over the years, have built a stabilizing mechanism to offset excessive populism. Every mature democracy has a constitutional provision for bringing in that balance. The U.K. has its House of Lords; the U.S.A. has its Senate and India has its Rajya Sabha.

Capitalism too needs such a stabilizing force to counter that occasional “irrational exuberance” of the stock markets. That role is being played by private equity. It is difficult to imagine an independent WNS, Genpact or somewhat smaller EXL Services today without the helping hand of private equity. In all these management buyouts, private-equity firms have ensured that the companies get that much-needed time to transform themselves, from being execution-oriented captive outfits to business-focused independent outsourcing companies, while remaining isolated from short-term quarterly pressures.

It will not be an exaggeration to say that today, these firms together represent the new force of pureplay BPO companies that provide the only serious alternative to IT services firms for customers looking at globalizing their business service delivery.

In short, private equity has been able to re-draw the industry dynamics in a manner that helps customers. Is n’t that capitalism’s ultimate objective?

Private equity’s role in outsourcing is going to be further defining. And it may happen sooner than you think.