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According to a leaked internal presentation reviewed by Bloomberg, Starbucks is taking its software development in-house and replacing it with AI tools that the company is betting can replace traditional software applications, resulting in significant cost savings (1).
The move could disrupt the executive ranks of major software companies such as Microsoft and International Business Machines Corp. Shake, which sold both software systems to the Seattle-based specialty coffee retailer. Currently, Starbucks is spending about $400 million on software, fulfilling a promise made by Chief Technology Officer Anand Varadarajan, who said earlier this year that Starbucks had “clear opportunities to reduce spending” on its software operations.
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The Bloomberg story was well received on Wall Street, with Microsoft shares falling 2.4% within 24 hours of publication and IBM losing 5.2%. Meanwhile, Starbucks shares rose 3% and are up 25% year-to-date. Additionally, there are growing rumors on Wall Street that Oracle’s Simphony point-of-sales software system, which Starbucks has long used, may also be at stake (2).
The leaked report also noted that Starbucks leadership is reviewing “every contract and service,” which includes the development of a new point-of-sales system being developed internally to replace the Oracle system. Starbucks engineers are reportedly using AI-powered coding tools to create custom software faster and more cost-effectively.
According to the Bloomberg report, Starbucks expects to save $30 million on enterprise technology spending in 2026 and $10 million on software spending alone. The coffee giant expects to launch a new inventory tracking and maintenance management system in late 2027 to replace its Microsoft and IBM software, the leaked report said.
Big software developers have reason to worry, but it’s not all bad news
Technology industry experts say Starbucks’ move signals a significant shift away from enterprise software providers.
“On the surface, it’s about cost cutting and fundamentally a shift in ownership,” Debbie Madden, founder of Stride, a New York City-based agent AI consulting and software development company, told Moneywise.
Over the past two decades, large companies have chosen to buy software from companies like Microsoft, IBM and Oracle because the cost of building a system in-house and hiring dozens of software engineers was prohibitive. Now AI is changing that equation.
“That standard is gone,” Madden said. “The line between what you build and what you buy has shifted, and Starbucks caught on early.”
Nevertheless, it is premature to speak of the end of enterprise software systems. “Companies will continue to buy infrastructure, payments and everything where compliance is the most important thing,” Madden noted.
What’s changing now is the middle of the software stack, particularly inventory tracking, maintenance management and internal workflow tools. “This is software that codes how your specific business runs,” Madden added. “This is what companies will increasingly own and build themselves.”
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Software is still in growth mode despite the rise of AI
While discussion of AI replacing traditional computing systems becomes more common, the software sector remains resilient.
According to Precedence Research (3), the global software market size is expected to be $921.14 billion in 2026 and is expected to reach $2,468 billion by 20235, representing a CAGR of 11.6% during this period.
“The global software market is emerging as a high-growth investment opportunity, driven by accelerating digital transformation, rapid cloud adoption and increasing cybersecurity requirements across industries,” Precendence reported. “The increasing digitization of operations and the increase in cyber threats are also driving the growth of the software market.”
But the days of relying on large software systems developers for all of an organization’s technology development needs appear to be fading, albeit gradually.
“This is less a mass exodus of enterprise vendors and more a predictable unbundling, and Starbucks is a leading indicator, not an outlier,” Suleman Siddiqui, chief strategy officer at Virginia-based Sthenos Technologies, told Moneywise.
Because creating custom software required a large, slow development effort, large software packages were required, so purchasing a general-purpose system from Microsoft or IBM was the only option. “That was the rational default, even if it fit maybe 70% of your actual workflow,” Siddiqui said. “Now AI reduces the cost of building the missing 30%, turning the math around for every workflow that is centralized, high-volume, and specific to the way you work, which is exactly what Starbucks-scale inventory tracking is all about.”
Siddiqui said companies will continue to buy software commodity systems where their processes are not a differentiator, such as payroll, email and general ledger accounting. Yet these same companies will increasingly build the operational workflows that give them a competitive advantage, rather than letting one generic tool impose another’s business model.
“The part that is left out of the headline is the liability this creates,” Siddiqui noted. “In-house developed, AI-powered tools still need to be maintained, secured and verified, and the licensed vendor product has quietly inherited all of that. Replace it and you inherit it.”
The companies that win the software transition will combine the build decision with the verification and ownership capacity to actually run what they build, while those that only seek software license savings will likely rediscover why software-as-a-service existed in the first place. “My rule of thumb for CIOs weighing a Starbucks-like pivot is: buy your product, build your advantage and budget for the fact that build means own,” Siddiqui added.
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Bloomberg (1); PYMNTS.com (2); Yahoo Finance (3)
This article originally appeared on Moneywise.com with the title: Starbucks spends $400 million a year on software – now it’s using AI to develop its own software and cut out the middleman
This article is for informational purposes only and should not be construed as advice. The provision is made without any guarantee.
https://finance.yahoo.com/technology/ai/articles/starbucks-spends-400-million-software-153043217.html
