日本語
"We want to reduce our reliance on external vendors for system development."
"We’re trying to internalize system development, but it’s not going well."
Many companies may be dealing with these concerns. Internal development has numerous advantages, such as allowing personnel familiar with the company's business to lead development and enabling faster delivery cycles.
On the other hand, challenges such as securing specialized talent and building an internal system must be addressed. To successfully internalize development, a strategic approach based on internal resources and organizational structure is essential.
This article provides a detailed explanation of the benefits and steps involved in internalizing system development. It also introduces the lab-based development model as a recommendation for companies that find it difficult to transition immediately due to limited resources.
If you are considering internal system development, we hope this will be a helpful resource.
Akira Shimazoe
CEO of Solashi Japan LLC. Engaged in the development and operation of internal systems at Suntory. Founded Yper Inc., serving as CTO and CPO, contributing to product launch and growth.
What is Internal System Development?
Internal system development refers to the effort to handle the development and operation of internal systems in-house, without outsourcing.
The scope of internalization extends across the entire system lifecycle, including design, development, operation, maintenance, and improvement.
Until recently, it was common to outsource in-house system development to external IT vendors. However, to promote agile digital transformation (DX) by developing and updating systems optimized for a company's unique business needs, more companies are recognizing the necessity of internalization.
However, successfully internalizing development involves many hurdles. In reality, many companies struggle to implement it effectively. From hiring the right people to building an appropriate structure, various challenges must be overcome. Therefore, it's important to strategically plan the scope and method of internalization based on your company’s situation.
Background: Why Internal Development Is in Demand
There are two major reasons why internal system development is becoming increasingly necessary.
- Breaking free from reliance on IT vendors
- Addressing the shortage of IT talent
Let’s take a closer look at each point.
1. Breaking Free from IT Vendor Dependence
One major goal of internalizing system development is to reduce dependency on IT vendors. Many Japanese companies have long outsourced most of their development work. As a result, several issues have arisen:
- The internal structure and specifications of systems become unclear, making it difficult to modify or renew in-house
- The pace of development is constrained by the responsiveness of external vendors
In such circumstances, it's difficult to develop systems tailored to internal business needs.
Furthermore, dependency on vendors hinders digital transformation. Driving DX requires effective use of internal data, adoption of new technologies, and continual system improvement — all of which are difficult to manage when the company is not in control.
Internalization enables system development to be led by employees who understand the business, allowing for faster and more flexible development.
2. Addressing the IT Talent Shortage
Internal system development also helps solve the IT talent shortage.
According to the Ministry of Economy, Trade and Industry’s survey on IT workforce supply and demand, demand for IT professionals will continue to rise, with a projected shortfall of at least 164,000 — and possibly up to 787,000 — engineers by 2030.
As this shortage deepens, companies are striving to secure IT talent — but hiring externally is increasingly difficult. Internalizing development is an effective solution to this issue. It offers the following benefits:
- You can train IT talent with deep knowledge of your business
- You can expand your internal IT workforce at your own pace without relying on external hiring
By cultivating internal IT professionals through in-house development, companies can address the ongoing talent shortage. While training takes time, internalization is a highly viable long-term strategy for sustainable talent acquisition.
Why Internal Development Often Fails
While many companies aim to internalize system development, not all are successful. There are three common reasons for this:
- Lack of personnel – not enough internal resources for development
- Unstructured internal organization – no framework to support internal development
- Lack of know-how – insufficient internal expertise or experience
It’s difficult to overcome these challenges quickly. That’s why we recommend the following two approaches:
The first is partial internalization. Start with small, simple tasks. This reduces the difficulty and required effort, while gradually building internal expertise.
The second is leveraging external resources. Outsourcing or consulting can supplement the manpower and skills your company lacks.
By combining these approaches, companies can steadily make progress toward internal development.
The Benefits of Internal System Development
By internalizing system development, companies can enjoy the following four benefits:
- Accumulating knowledge and expertise within the company
- Faster system development
- Reduced outsourcing costs
- Enhanced security
Completely internalizing development at once is difficult, but even partial internalization can bring these benefits. It’s important to begin with what’s feasible based on your current situation.
Let’s take a closer look at each benefit.
1. Accumulating Knowledge and Expertise Internally
By developing systems internally, companies can build up internal knowledge and expertise.
When outsourcing development, the external partner takes the lead in problem-solving, so little knowledge remains within the organization.
On the other hand, internalization allows your team to directly handle design and development, which means deep system knowledge is retained in-house. This internal expertise can also support future talent development.
Internalization improves your company’s development capabilities and creates a foundation for quickly adapting to business changes.
2. Faster System Development
Internal development also leads to faster development cycles, as team members who deeply understand the system can implement changes more quickly.
Another advantage is closer collaboration with related departments. Because internal teams can directly gather feedback from end users, they can respond quickly and accurately to needs, reducing rework and accelerating development.
For these reasons, internalization contributes to faster development and more efficient use of personnel resources.
3. Reduced Outsourcing Costs
Reducing outsourcing costs is another benefit of internal development.
When outsourcing, companies must pay for the external vendor’s expertise and technical ability — especially for high-level tasks — which can be expensive.
By internalizing development, companies can reduce or eliminate these expenses...
4. Leads to Improved Security
In-house system development also contributes to enhanced security.
This is because there is no need to provide confidential information to external parties, reducing the risk of information leakage. Additionally, development can be aligned with the company’s own security policies, allowing for finely tuned security measures suited to actual operations.
Furthermore, knowledge of the system accumulates internally, making it easier to identify and address vulnerabilities, thereby strengthening security.
In this way, in-house development can yield significant benefits from a security perspective.
How to Promote In-House System Development
Here are five steps to promote in-house system development.
- Clarify the purpose and goals of in-house development
- Organize internal systems
- Determine the scope of in-house development
- Secure necessary resources
- Execute and manage in-house development
You don’t have to carry out all of these steps on your own. Where internal resources or expertise are lacking, outsourcing or consulting can help move the process forward smoothly.
In particular, the stages of determining the scope, securing resources, and managing execution can greatly benefit from the support of experienced external partners. At Solashi Co., Ltd, we assist with in-house development by proposing the right project size based on your business plans and offering flexible development structures and schedules. If you're considering in-house development, feel free to consult with Solashi.
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1. Clarify the Purpose and Goals of In-House Development
Clearly defined purposes and goals are essential for promoting in-house system development. A clear purpose helps in selecting the most effective measures.
Set specific objectives such as reducing development costs, improving quality, and gaining a competitive edge.
Once the purpose is clear, set specific goals to achieve that purpose. These goals should be as quantifiable as possible, with clear deadlines. For example, “Reduce development costs by 30% within one year.”
By setting measurable goals, it becomes easier to evaluate project progress and take concrete steps toward achieving the purpose.
Finally, share the established purpose and goals internally to gain understanding and cooperation from stakeholders. Explaining the significance and expected benefits of in-house development will help gain internal support.
2. Organize Internal Systems
Take inventory of internal systems and organize the dependencies between systems and their relation to business operations. By gaining an accurate understanding of internal systems, you can better estimate the workload and avoid overlooking important systems.
Organizing internal systems also enables you to select which systems to bring in-house. Prioritizing systems that directly impact competitiveness or business efficiency will help maximize the benefits of in-house development.
3. Determine the Scope of In-House Development
Once internal systems are organized, decide the scope of what will be developed in-house.
When determining the scope, it’s important to consider the entire system development lifecycle. You need to identify which phases—requirements definition, design, implementation, testing, deployment, or maintenance—will be handled in-house.
In particular, handling upstream processes such as requirements definition and design in-house is very effective in ensuring alignment between business needs and systems. It also allows your company to take the lead in projects.
If you wish to internalize the entire development process, don’t do it all at once—expand the scope gradually.
Start with areas that directly enhance your competitive edge or where accumulating in-house expertise is especially important.
4. Secure Necessary Resources
Once the scope of in-house development is defined, secure the necessary resources such as equipment and personnel.
Prepare the infrastructure including PCs, servers, and network environments required for development, and gather development tools and software. Securing engineers and project managers with system development experience is also crucial.
If securing talent is difficult, consider partially utilizing external resources.
5. Execute and Manage In-House Development
Once resources are secured and the development process is designed, implement a pilot project (a trial run).
The key is to monitor the progress of in-house development and promptly implement improvement measures for any issues.
Establish a system to visualize and share progress and issues among stakeholders. Hold regular progress reports and issue-sharing meetings to ensure everyone is on the same page.
This allows for early problem detection and resolution, facilitating smooth in-house development. The insights gained through progress management can also be applied to future projects.
Common Challenges in In-House System Development
Although in-house system development offers many benefits, it can also introduce new challenges.
- Quality tends to be unstable
- Difficulties in securing IT talent
- Lack of cost awareness in development
When promoting in-house development, it’s important to address these issues appropriately. Here’s a more detailed explanation.
1. Quality Tends to Be Unstable
One issue with in-house system development is that quality tends to be unstable.
When outsourcing to external SIers, the development is handled by experienced professionals and the deliverables are subject to quality standards defined by each company, ensuring a certain level of quality.
On the other hand, when system development is internalized, there is a risk of reduced system quality due to a lack of technical skills among personnel or an underdeveloped development structure.
To prevent this, it is essential to establish clear quality standards and develop a robust in-house training system.
2. Difficulty in securing IT personnel
To promote the internalization of system development, highly skilled IT personnel are indispensable. However, securing such talent is extremely difficult at present. While training personnel in-house is an option, it presents issues in terms of both cost and time.
Companies facing IT talent shortages must recognize that internalization will take considerable time to achieve. When considering internalization, it is important to have a clear understanding of the current IT talent market and allocate sufficient time for recruitment and training as needed.
3. Decline in cost awareness
When shifting from outsourcing to internalization, there is a tendency for cost awareness to decline.
With outsourcing, costs are clearly recorded, making it easy to track expenses. However, internalization makes costs less visible. It involves new costs such as personnel expenses, equipment, training and education, and software license fees, all of which are associated with development.
Since these costs are not as immediately apparent as outsourcing fees, cost awareness tends to diminish, which can lead to higher-than-expected development expenses. When promoting internalization, it is essential to implement a system that accurately tracks and manages development costs.
“Lab-Based Development” as an Internalization Option
Securing IT personnel is essential for internalization, but it is not easy given current challenges. Therefore, one highly recommended option for promoting internalization is “lab-based development.”
Lab-based development allows you to secure talented engineers. Since you can retain highly specialized external engineers exclusively, development can proceed in a manner similar to in-house teams.
Additionally, learning from the technical expertise of external engineers can contribute to in-house personnel development. Lab-based development is an effective approach to overcoming challenges during the transition to internalization.
What is Lab-Based Development?
Lab-based development is a development model used in offshore development (a method of outsourcing system development or operation and maintenance tasks to overseas companies). It is also referred to as a lab contract or ODC (Offshore Development Center).
The defining feature of lab-based development is the retention of a dedicated team not on a project basis, but on a monthly or yearly basis. This enables close communication with your team, much like an in-house development team. Lab-based development allows for the creation of a flexible development structure and provides the ability to adapt as needed.
Solashi, with its extensive experience in lab-based development, offers the most suitable development structure tailored to your needs. By utilizing Solashi's lab-based development services, you can work closely with your own development team to achieve fast and flexible system development.
If you are interested, please take a look at Solashi’s services.
Benefits of Lab-Based Development
The main benefits of lab-based development are the following three:
- Secure talented personnel
- Flexible support
- Accumulate know-how related to system development
Let’s take a closer look at each of these benefits.
1. Secure talented personnel
One major advantage of the lab-based development model is the ability to secure top-tier talent. By forming a dedicated in-house team, you can involve highly skilled engineers and expect high-quality development outcomes.
These engineers are well-versed in the latest technological trends, enabling the team to proactively incorporate new technologies during development. In addition, experienced engineers possess strong problem-solving and decision-making abilities, allowing them to efficiently handle challenges and obstacles, thereby improving development speed.
2. Flexible Response Capabilities
Lab-based development operates under term-based contracts, which allows for flexible responses to specification changes or revisions during the development period. This flexibility enables adaptive development aligned with the project’s progress while minimizing additional costs.
In today’s rapidly changing business environment, a flexible development structure is essential. Lab-based development offers this adaptability, making it an appealing option for system development that quickly aligns with evolving business needs.
3. Accumulating Know-How in System Development
With lab-based development, dedicated members collaborate over a defined period, allowing valuable insights and know-how gained during the project to be steadily accumulated. This accumulated knowledge enables swift implementation of initiatives involving cutting-edge technologies.
By receiving proposals based on the latest trends from a dedicated team, the cycle from planning to development and performance evaluation can be greatly shortened. This contributes to improved development speed and quality, as well as cost reduction. Furthermore, the know-how acquired through lab-based development becomes a valuable asset when transitioning to in-house development. By leveraging this knowledge, your in-house team can improve development efficiency and quality post-transition.
Build the Optimal In-House Development System for Your Business
In-house system development plays a crucial role in strengthening internal development capabilities and establishing a foundation that can flexibly respond to changes in the business environment. By advancing in-house development while nurturing internal IT talent and accumulating know-how, you can build a robust development system that serves as a source of long-term competitiveness.
However, in-house development does come with its challenges. In particular, securing and nurturing talent, ensuring quality, and managing costs are key issues that need to be addressed. To overcome these challenges, it's essential to accurately assess your current situation and develop an appropriate strategy.
If resource constraints make full in-house development difficult, leveraging lab-based development is a highly recommended first step. Lab-based development offers several advantages, including securing top talent, flexible development, and knowledge accumulation.
Solashi Co., Ltd has extensive experience in lab-based development and can propose project scopes tailored to your business plans. With flexible development structures and schedules that align with your specific challenges, we help you optimize your IT investments.
If you're considering in-house development, feel free to contact Solashi Co., Ltd.
Akira Shimazoe
Representative of Solashi Japan LLC. Born in April 1989 in Fukuoka Prefecture. Graduated from the Graduate School of Information and Mathematical Sciences at Osaka Prefecture University. Joined Suntory System Technology Co., Ltd., an IT subsidiary of Suntory Holdings, in 2014. Broadly responsible for the development, operation, and implementation of vending machine delivery management, efficiency improvements, and sales management systems. Founded Yper Inc. in 2017, serving as CTO and CPO. Contributed to the launch and growth of the app-linked delivery bag "OKIPPA." Selected for Toyo Keizai's prestigious "Amazing Venture 100" and Forbes' "Forbes 30 Under 30 Asia 2019."
