The Buy-or-Build Decision, Revisited: How Agentic AI Changes the Economics of Enterprise Software

• URL: http://arxiv.org/abs/2604.26482v2
• Date: Sat, 02 May 2026 10:18:52 GMT
• Title: The Buy-or-Build Decision, Revisited: How Agentic AI Changes the Economics of Enterprise Software
• Abstract summary: Advances in generative artificial intelligence are disrupting the economics of the make-or-buy decision for enterprise applications.<n>This paper adopts a conceptual research approach to re-evaluate the factors underlying the make-or-buy decision.
• Score: 0.0
• License: http://arxiv.org/licenses/nonexclusive-distrib/1.0/
• Abstract: Advances in generative artificial intelligence, particularly agentic coding systems capable of autonomous software development, are disrupting the economics of the make-or-buy decision for enterprise applications. The "SaaSocalypse" narrative predicts that AI will render large segments of the Software-as-a-Service market obsolete by enabling firms to build software in-house at a fraction of historical cost. This paper adopts a conceptual research approach, combining transaction cost economics and the resource-based view with an assessment of current AI capabilities, to systematically re-evaluate the factors underlying the make-or-buy decision. It makes three contributions. First, it provides a factor-level analysis of how AI reshapes seven canonical decision determinants: cost, strategic differentiation, asset specificity, vendor lock-in, time-to-market, quality and compliance, and organizational capability. Second, it develops a typology of enterprise applications by their sensitivity to AI-induced shifts in make-or-buy economics. Third, it demonstrates that AI fundamentally transforms the governance properties of the Make option, shifting it from Williamson's pure hierarchy to a hybrid governance form that combines code ownership with external AI infrastructure dependency, with qualitatively different economics, capability requirements, and governance structures than pre-AI in-house development. The analysis finds that the SaaSocalypse thesis is overstated for most enterprise application categories; Make is most compelling for commodity utilities and differentiating custom applications in the AI era, while regulated and mission-critical systems remain predominantly in the buy domain.

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