What Yaoko’s Decision Reveals
News that supermarket chain Yaoko has made a major shift from outsourcing IT system development entirely to vendors to building in-house capabilities has sparked discussion. This decision to transition from a traditional external contractor model to an internal development organization may seem like a “no turning back” choice, but I see it as an excellent example of “reversible management.”
Why? Because this decision incorporates multiple mechanisms to ensure reversibility. In this article, I analyze Yaoko’s case from the perspective of “reversible management” and present a decision-making framework for SME executives considering IT in-house development.
Why the Shift from “Full Outsourcing” to “In-House” Is Reversible
Many SME executives fear two things about IT in-house development: the risk of locking in talent, and the risk of being unable to exit. Hiring engineers as full-time employees and building an internal development team certainly seems like a decision that can’t be easily reversed.
However, a closer look at Yaoko’s case reveals they are practicing “reversible in-house development.” The key is that their goal isn’t “building systems” but “building an organization that can respond to business changes.”
Design Philosophy: Not Tied to People
Yaoko adopted an in-house development structure that doesn’t depend on specific technologies or people. They started by “decomposing” the development process they had fully outsourced. What should be done in-house, and what should continue to be outsourced? Instead of bringing everything in-house, they adopted a hybrid strategy: keeping only the core parts internal and leveraging external resources for the rest.
This approach aligns with the basic principle of “reversible management”: focus on the work, not the people. By breaking down system development based on “what to do” rather than “who does it,” they leave room to switch back to external resources even if in-house efforts don’t work out.
Reversibility Lost in In-House Development and How to Counter It
A common pitfall when pursuing in-house development is the psychological cost: “Once we go in-house, we can never return to vendor dependency.” This psychological cost often undermines actual reversibility.
Set Exit Conditions First
What’s notable in Yaoko’s case is that they set “exit conditions” for in-house development in advance. They clearly defined evaluation periods for their internal organization and set KPIs to achieve within those periods. If those KPIs aren’t met, they can scale back in-house efforts or return to vendor dependency.
This is exactly what I always advise my clients: “pre-design exit conditions.” By deciding “when and under what conditions to exit” before starting in-house development, you lower the psychological barrier and enable bolder challenges.
Three Key Metrics to Monitor
Executives should monitor three key points to judge the success of in-house development.
First is “development speed.” Has the time from requirements definition to release shortened compared to when it was fully outsourced? Second is “quality.” Have bug rates and system downtime improved? Third is “employee retention.” Are the engineers crucial to in-house development leaving?
Regularly monitor these indicators, and if no improvement is seen within the evaluation period, reconsider continuing in-house development. This cycle is the essence of reversible in-house development.
The First Step SMEs Can Take Now: “Reversible In-House Development”
You might think a large company like Yaoko’s case is too big for SMEs. But the essence of in-house development isn’t about scale. In fact, I believe SMEs are better positioned to practice reversible in-house development.
Start with a “Trial Run”
When considering in-house development, SMEs should start not with “hiring full-time employees” but with “contracting freelancers” or “using SaaS.” Outsource part of system development to external freelancers and observe the results. This “trial run” period helps determine whether in-house development is truly necessary.
Make the Boundary Between In-House and Outsourcing Reversible
When pursuing in-house development, you don’t need to keep everything in-house. Only internalize core business logic, while leaving UI and infrastructure to external partners. Design this boundary as a “trial” rather than a “fixed” line, allowing flexible adjustments as circumstances change.
Conclusion: In-House Development Is an Experiment, Not a Commitment
Yaoko’s IT organizational reform teaches us the importance of viewing in-house development as an “experiment” rather than a “decision.” The goal isn’t to build systems, but to build an organization that can respond to business changes. That’s why the organization itself must be designed to change.
From a “reversible management” perspective, the success of in-house development lies not in “how quickly you can bring it in-house” but in “how quickly you can decide to exit.” Set exit conditions in advance, define monitoring points, and establish evaluation periods. By practicing this simple framework, even SMEs can confidently take on in-house development.
Why not start with a “trial run” of in-house development at your company? With a reversible design, failure isn’t something to fear.
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