Enterprises Build Custom AI Tools to Replace Software Vendors
Companies are using generative AI to build internal software, reducing reliance on major vendors like Workday and SAP to cut licensing costs.
Enterprises are increasingly adopting a DIY approach to software development, utilizing generative AI to build internal applications rather than purchasing them from major vendors such as Workday, SAP, and Salesforce. Companies including West Monroe, Spotify, and Twilio have developed custom tools for payroll auditing, sales coaching, and HR to avoid high licensing fees and service costs.
McKinsey & Company surveyed 1,719 executives and found that approximately one-third of organizations have declined software purchases because they can now build the required functionality in-house. Some firms report immediate operational gains; Twilio claims its internal AI coach reduced the sales-deal lifecycle by 54%, while Gray is developing a financial forecasting tool to save $1 million.
Enterprise vendors have pushed back against the trend, warning that homemade tools lack the stability, data depth, and compliance of professional platforms. Workday's leadership cautioned that AI hallucinations in internal tools could lead to audits or lawsuits, while SAP argued that large language models cannot replace the experience of established vendors. Despite the shift toward custom builds, Gartner forecasts that worldwide IT software spending will still grow nearly 16% this year to $1.47 trillion.
