AI in Software Development: Buy vs Build Debate

Luc Elsby

Founder

Leverage AI

1st January 2025

For decades, businesses have faced a fundamental question when it comes to software: should we buy off-the-shelf solutions or build custom systems? This decision has traditionally been guided by factors like budget constraints, timeline requirements, and the uniqueness of business needs. But generative AI is radically reshaping this landscape, blurring the lines between buying and building while creating entirely new possibilities.

Traditional Software: The Compromises of "One Size Fits All"

Traditional business software serves a critical function: it allows organisations to efficiently store, share, and act on information. Without it, modern business simply couldn't function. However, the economics of traditional software development created inevitable trade-offs:

High Development Costs: Custom software has historically been prohibitively expensive, requiring large teams of specialised engineers working for months or years
Standardisation vs. Customisation: To achieve economies of scale, software vendors built standardised products designed to serve broad market segments rather than specific companies
Subscription Burden: Businesses typically cobble together numerous specialised applications—CRM, order processing, marketing automation, etc.—with per-seat pricing that becomes increasingly expensive as organisations grow
Integration Challenges: These disconnected systems create data silos, security vulnerabilities, and inefficient workflows

AI's Dual Revolution: Intelligent Software and Democratised Development

Generative AI is transforming this landscape in two fundamental ways:

1) The Shift from Rule-Based to Intelligent Software

Traditional software follows rigid, predefined rules coded by humans. AI-enabled systems, by contrast, can learn, adapt, and perform complex cognitive tasks previously requiring human intervention:

Automated Knowledge Work: AI systems can now autonomously handle tasks like customer service, data analysis, document processing, and even decision-making
Personalised Experience: AI can customise software behaviour to match specific user preferences and company workflows without requiring custom code
Continuous Improvement: AI systems learn from every interaction, becoming more valuable and effective over time

2) AI as a Software Development Accelerator

Perhaps even more revolutionary is how AI is transforming the economics of software development itself:

Productivity Boost: According to McKinsey research, "Recent estimates indicate [AI] can improve developer productivity by 35 to 45 percent, a spike that outperforms past advances in engineering productivity, leading to lower cost of code development."
Faster Iteration: AI can speed up code documentation by 50% and code refactoring by 20-30%, enabling much more rapid development cycles
Democratised Development: AI coding assistants are making software development accessible to less technical users, expanding who can participate in software creation

The New Build vs. Buy Paradigm

This AI revolution is fundamentally reshaping software decisions. While McKinsey projects $250 billion in AI enterprise spending by 2027, they also forecast a dramatic increase in vendor switching as AI lowers barriers to change. For buyers, AI creates higher expectations, reduces switching costs, and enables more specialised solutions. For builders, AI significantly cuts development costs, makes creation more accessible to non-technical users, and amplifies the benefits of ownership through eliminated licensing fees and greater control. Together, these changes create unprecedented flexibility in how businesses approach their software needs.

The Leverage AI Approach

At Leverage AI, we believe the benefits of software customisation and the lower costs of development mean every business has the opportunity to realistically develop their own software. Our approach is to start with open source building blocks to get us to get quickly off the ground, creating systems that are both robust and flexible.

Then we add AI capabilities, turning traditional software into intelligent systems that can understand your business context and automate complex processes. By combining these open-source technologies with your specific business knowledge, we create solutions that precisely match your unique workflows rather than forcing you to adapt to generic software.

The benefits of this approach are transformative:

Complete ownership: Unlike SaaS subscriptions, you own the intellectual property and can modify it at will
Cost effectiveness: Eliminate escalating per-seat licensing fees and consolidate multiple disconnected systems
Competitive advantage: Encode your unique business processes into systems that become more valuable over time
Future-proof technology: A flexible foundation that can evolve with your needs and incorporate new AI advances