Why Buy Software When I Can Build It for Less?
AI is eroding the economics of Software companies
“Build vs. Buy” Is Making A Comeback.
To “build vs. buy” used to be a question companies would ask 20-30 years ago when there was a need to address a use case with Software automation. With the use of LLMs like Anthropic’s Claude Opus 4.5, companies can build software tools and applications for a fraction of the cost vs. 5 years ago, never mind 20-30 years ago. We built the most recent version of CEORater for a fraction of the cost versus our initial prototype in 2017.
Unless the Software product in question is really a delivery system for proprietary data (Bloomberg, S&P Global, FactSet to name several examples), or if the Software application enjoys a network effect (PayPal, Gmail, TikTok), why not build an application using AI tools rather than subscribe to an off-the-shelf application?
Where is the moat with workflow software? What is defensible about Accounting Software, Tax Prep Software, Website builder Software, Salesforce Automation and HR Software? You get the picture.
The “Build” case becomes increasingly compelling when the use case for the Software is internal-only, which means less complexity (no customer management system, no marketing system, no payment and tax management system, etc.)
All the big Software companies will feel this “custom build”, pressure at the margin. Many are feeling it now.