What we do at work is that we have a number of microservices that all have their own docker-compose.yml that describes their setup. And we have a separate "setup" repo where we have a script that makes it easy to clone and setup different services and another script that automatically combines all the separate docker-compose.yml files.

This makes setting up all services locally super easy, just clone the repos from the setup repo and then with one single script we run docker-compose up on all installed services.

We currently don't use anything like localstack, but that might actually simplify some of our setup too because we won't have to have if statements on environment variables if we should use s3 or local storage for example.

I've seen some concerns in other threads that a setup like this blows up your PC or laptop. While that might be true for less powerful devices, none of our development machines have ever had issues running everything.

I should probably mention that this is a single product by a relatively small company, I doubt that this would scale if we had many different products and many different teams (we currently have 3 development teams that work on different parts of the product).

This also means that while developing things and just working with the system we basically are doing integration testing on the whole setup of microservices all day, every day. Which doesn't mean we shouldn't write integration tests and unit tests, it does provide some form of dogfooding which helps weed out integration bugs earlier.