Should you build or buy software? This Wall Street firm has a new tool to decide.
Should companies build or buy software? An RBC analysis finds custom AI apps are often more expensive than SaaS.
A new tool from Wall Street firm RBC Capital Markets aims to help businesses decide whether to build or buy software. This comes after the rise of AI coding tools, which make it easier for companies to create their own internal applications instead of paying for expensive external software. The tool allows companies and investors to input the cost of a software subscription and compare it with the full cost of building and running an in-house alternative.
While the cost of initial coding is considered, the tool also takes into account ongoing maintenance, security risks, repairs, and the potential for less reliable or less capable in-house solutions. RBC's analysis suggests that in most cases, building custom business software is more costly than purchasing it. However, this may not hold true for simpler tools that are less critical to the business.
The biggest hidden expense, according to RBC, is the talent required. Even if a custom app is feasible, companies must question whether their most skilled AI developers should focus on rebuilding existing software or developing something entirely new.
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