McKinsey finds a third of companies skipped a software purchase they could build with AI

McKinsey's question counts decisions at the level of a single product or feature ^[4]. A company that skipped one add-on counts the same as one that skipped ten. The one-third share tells you how many buyers now weigh building. Business Insider's reading of the revenue effect is narrower: most companies are not replacing whole platforms, but the practice could dent the incremental revenue vendors earn from add-on features ^[5]. Spotify's case adds a second kind of spending. According to Anna Lundström, its chief HR officer, the company might have sought external support to build HR Bot if AI did not exist ^[11]. On that account, some of the money displaced would have paid for outside build help, and some for licenses.

The board-deck version of West Monroe's choice is a saving of more than $300,000 a year, Tanya Moore's estimate of what buying the tools would have cost ^[2]. Across roughly 2,000 employees, that is about $150 per employee per year, or a little more ^[1]. The version is incomplete. The firm has swapped a vendor's fee for its own staff's time. Someone has to fix bugs, roll out updates, answer feature requests and keep the tool working as more employees rely on it ^[16]. An AI tool can also make costly mistakes, such as leaking staff's private information ^[16]. Business Insider's account does not include what West Monroe spent on the build or what the upkeep costs.

The strongest objection comes from the vendors. "If an agent skips a compliance step or approves pay outside your grid, you're not dealing with a minor hallucination," Gabe Monroy, Workday's chief technology officer, wrote in a June blog post. "You're dealing with an audit, a regulator, or a lawsuit." ^[17] At a Goldman Sachs conference, SAP chief executive Christian Klein argued that large language models are not enough to replace vendors' years of experience building HR software and the data they have collected ^[18]. Workday and SAP sell the kind of software these builds displace ^[20]. That does not make the warning wrong where pay and compliance are involved. Most of the tools on record sit further from that line: an HR help desk at Spotify ^[10] and a sales coach at Twilio ^[12]. West Monroe's payroll error checker is the closest to it ^[1].

For a vendor, the order of events can matter more than any one lost deal. Twilio built Jarvis last year ^[12]. Khozema Shipchandler, its chief executive, told Business Insider that if a tool like it already exists or comes to market, Twilio "probably won't use it, because we've already built our own." ^[14] This quarter, the customer's build buys a saving and an upkeep bill. From next year on, any vendor with a similar tool is pitching against something the customer already owns. Kyle Lagunas, an HR-tech industry analyst, said the trend "is going to erode a bit of the walled garden," and that HR teams "can self-serve a lot more." ^[7]