The relocation of customer support and back-office functions to secondary cities in Africa and Southeast Asia is no longer the preserve of large multinationals. Mid-market firms, typically defined as those with annual revenues between £10m and £500m, are increasingly following suit. The motivation is not simply cheaper labour. It is a combination of demographic tailwinds, improving digital infrastructure and a need for operational flexibility in a tight labour market.
This article examines what has changed, why it matters for commercial leaders, and what risks and opportunities lie ahead. It draws on observable trends and publicly available information, with source notes for editorial review.
What Has Changed
For two decades, offshoring was dominated by large enterprises seeking scale. India and the Philippines were the primary destinations, with call centres and back-office processing concentrated in major cities such as Bengaluru, Manila and Chennai. Mid-market firms often lacked the procurement power and legal resources to manage such arrangements effectively.
That is changing. Several factors are converging:
- Secondary cities in Africa and Southeast Asia are emerging as viable alternatives. Cities such as Kigali (Rwanda), Accra (Ghana), Nairobi (Kenya), and in Southeast Asia, Cebu (Philippines), Da Nang (Vietnam) and Penang (Malaysia) are attracting investment in business process outsourcing (BPO) and shared services.
- Digital infrastructure has improved markedly. Fibre-optic connectivity, cloud-based telephony and AI-assisted workflow tools have reduced the operational complexity of managing remote teams.
- Talent pools in these cities are younger, more educated and often multilingual. The demographic dividend – a high proportion of working-age people relative to dependents – is most pronounced in Africa and parts of Southeast Asia.
- Cost pressures in traditional hubs have risen. Wage inflation in Manila and Bengaluru, combined with high attrition rates, have pushed firms to look for second-tier locations that offer lower turnover and more stable costs.
Mid-market firms are not simply replicating the old offshoring model. They are often using a hybrid approach: retaining a small in-house team for complex cases, while routing routine queries to a partner or a captive centre in a secondary city. This allows them to scale up or down more quickly than a purely domestic operation.
Why It Matters
For founders and operators, the decision to relocate support and back-office functions is not just a cost-saving exercise. It affects customer experience, data security, regulatory compliance and brand reputation. A poorly executed move can damage customer trust, while a well-managed one can improve service levels and free up capital for core business activities.
The commercial logic is compelling. According to industry analyses, labour costs in secondary African cities can be 30-50% lower than in the UK or US, and 10-20% lower than in established Asian hubs. However, these figures vary widely by role and city, and should be treated as indicative rather than definitive.
More importantly, the quality of work can be higher. Secondary cities often have lower attrition rates because there is less competition for talent. Employees in these locations tend to stay longer, reducing recruitment and training costs. For mid-market firms, this stability is valuable, especially in customer-facing roles where continuity matters.
Who Is Affected
The shift affects several groups:
- Mid-market firms in the UK, Europe and North America are the primary movers. They are typically in sectors such as e-commerce, SaaS, fintech, healthcare and professional services, where customer support and back-office processing are significant cost centres.
- Employees in traditional hubs may face wage pressure or job displacement, though the effect is mitigated by the fact that many firms are expanding rather than replacing existing teams.
- Local economies in secondary cities benefit from job creation, skills transfer and increased spending. However, there are risks of over-reliance on a single industry, as seen in some Philippine cities.
- BPO providers and consultancies are adapting their offerings to serve mid-market clients, often providing managed services that bundle technology, talent and compliance.
Commercial Impact
The commercial impact is twofold. First, there is direct cost savings. For a mid-market firm with 100 support staff, relocating 50% of roles to a secondary city could reduce annual operating costs by £500,000 to £1m, depending on the location and role. These savings can be reinvested in product development, marketing or customer acquisition.
Second, there is operational flexibility. A distributed team can provide 24/7 coverage without excessive overtime costs. It also creates a natural hedge against localised disruptions, such as a pandemic or a regional economic downturn.
However, the benefits are not automatic. Firms must invest in training, quality assurance and cultural alignment. A support agent in Kigali may not instinctively understand British humour or regulatory nuances. Without proper onboarding and ongoing coaching, service quality can suffer.
Risks and Unknowns
Several risks require careful consideration:
- Political and economic instability: Some secondary cities are in countries with volatile political environments or currency fluctuations. Firms must assess the risk of disruption to operations.
- Data protection and privacy: Transferring customer data across borders raises legal issues, particularly under GDPR. Firms must ensure compliance with local and international regulations.
- Infrastructure reliability: While connectivity has improved, power outages and internet disruptions can still occur. Firms should have contingency plans.
- Talent scarcity in niche roles: While there is a large pool of generalist talent, specialised roles such as technical support or complex financial processing may be harder to fill.
- Cultural and language fit: Accent neutralisation and cultural training are essential, but they take time and money.
FY Outlook
The trend is likely to accelerate. As AI tools become more sophisticated, they will handle routine queries, freeing human agents to focus on complex interactions. This will make secondary cities even more attractive, as they offer a cost-effective workforce for the remaining human-centric tasks.
We expect to see more mid-market firms adopt a 'hub-and-spoke' model, with a small in-house team in the home country and larger teams in one or two secondary cities. This will be supported by a growing ecosystem of BPO providers that specialise in mid-market clients, offering flexible contracts and outcome-based pricing.
However, the pace of adoption will vary by sector. Highly regulated industries, such as financial services and healthcare, will move more slowly due to compliance requirements. Less regulated sectors, such as e-commerce and software, will lead the way.
Conclusion
The demographic dividend shift is a structural change in how mid-market firms organise their operations. It is not a fad or a short-term cost-cutting measure. It reflects a fundamental reassessment of where work can be done, driven by technology, demographics and changing labour markets.
For commercial leaders, the key is to approach this strategically. That means conducting a thorough feasibility study, selecting the right location, building a robust governance framework, and investing in training and quality assurance. Done well, it can enhance competitiveness and resilience. Done poorly, it can damage customer trust and brand reputation.
The evidence suggests that the benefits outweigh the risks for many firms, but only if the move is planned and executed with care. The FY Times will continue to monitor this trend and provide practical guidance for decision-makers.
