Table of Contents
Key insights
- Starbucks spends about $400 million each year on software alone, according to Anand Varadarajan, chief technology officer.
- The coffee chain is now developing software tools on its own to cut costs by $2 billion as part of its broader turnaround strategy.
Starbucks buys products from companies like Microsoft and IBM and spends hundreds of millions of dollars on software alone – but not for much longer.
A leaked internal presentation recently reviewed by Bloomberg News showed that Starbucks is developing its own in-house alternatives to software offerings it typically buys from tech giants. The coffee chain is developing its own solution for a Microsoft system that monitors inventory and an IBM product that monitors maintenance.
Bloomberg noted that Starbucks could roll out some of this internally developed software by the end of 2027, depending on how well the tools perform in tests.
The outlet said companies like Starbucks have been tied to technology providers for years because of the complexity of building tools and the disruption caused by software changes. Now AI is changing the landscape by making it easier to build software from scratch.
Starbucks aims to cut spending by $2 billion
Starbucks Chief Technology Officer Anand Varadarajan revealed in a meeting earlier this year that the company spends about $400 million on software alone. “There are clear opportunities to reduce spending,” Varadarajan said, according to a meeting recording seen by Bloomberg.
Developing custom software in-house can help reduce costs. Starbucks plans to cut expenses by $2 billion as part of a comprehensive turnaround strategy. However, creating software can also lead to higher maintenance and labor costs later.
The leaked presentation revealed that Starbucks reviews “every contract and service” and develops its own software solutions to replace tools that require engineers to heavily modify. For example, according to Bloomberg, the company has been working on a point-of-sale system for several years to replace Oracle’s Simphony platform. A point of sale system allows a business to process customer transactions at the moment of purchase. It handles core tasks such as collecting items, calculating totals and taxes, accepting payments and issuing receipts.
What companies can learn from Starbucks
According to Bloomberg, companies can view Starbucks’ departure from Microsoft and IBM as a blueprint for how they can cut software costs while adding AI tools.
Starbucks’ enterprise technology team expects budget savings of about $30 million this fiscal year, including $10 million in software savings. According to Bloomberg, executives see potential in building custom applications rather than borrowing everything from big vendors.
The outlet adds that companies should view AI as a driving force behind internal development and not just another software feature. AI-driven coding tools have made it easier for Starbucks engineers to develop new platforms quickly enough to compete with established software programs. This allows business leaders to identify areas where custom software could provide benefits and then use AI to accelerate those builds.
Additionally, Starbucks is diversifying its technology offerings by reducing its dependence on Microsoft and IBM. This approach encourages companies to identify which processes rely on a few external providers and create viable alternatives. Bloomberg noted that internal tools don’t have to replace commercial software overnight. Instead, they can be used as targeted replacements for the most expensive or limited products.
Key insights
- Starbucks spends about $400 million each year on software alone, according to Anand Varadarajan, chief technology officer.
- The coffee chain is now developing software tools on its own to cut costs by $2 billion as part of its broader turnaround strategy.
Starbucks buys products from companies like Microsoft and IBM and spends hundreds of millions of dollars on software alone – but not for much longer.
A leaked internal presentation recently reviewed by Bloomberg News showed that Starbucks is developing its own in-house alternatives to software offerings it typically buys from tech giants. The coffee chain is developing its own solution for a Microsoft system that monitors inventory and an IBM product that monitors maintenance.
Bloomberg noted that Starbucks could roll out some of this internally developed software by the end of 2027, depending on how well the tools perform in tests.
https://www.entrepreneur.com/business-news/starbucks-is-reducing-its-reliance-on-microsoft-and-ibm
