Starbucks is developing in-house tools with the help of artificial intelligence that could replace some software applications it currently purchases from companies such as Microsoft and International Business Machines.
The coffee chain is building an alternative to Microsoft systems to track inventory and IBM tools to manage maintenance, according to an internal presentation reviewed by Bloomberg News. Some of the software developed by Starbucks could be released to the public by the end of next year, pending testing results.
For years, companies have been tied to technology vendors due to fear of business interruption and the complexity of building in-house tools. Now, AI is changing that calculus by making it easier to develop applications from scratch and by encouraging companies to use the technology among their employees.
There are growing concerns about whether big software companies can use AI to fend off competition from startups and products developed by their own customers. This phenomenon has weighed on software stocks this year, with Microsoft and IBM both lagging behind the S&P 500.
Shares of both companies fell in premarket trading Thursday, with Microsoft down about 1.5% and IBM down 4%.
Starbucks spends about $400 million a year on software alone, Chief Technology Officer Anand Varadarajan told employees in an internal forum earlier this year. “There is a clear opportunity to reduce spending on software,” Varadarajan said, according to a recording of the meeting reviewed by Bloomberg News.
In-house software could be cheaper, an incentive for companies like Starbucks, which is looking to cut costs by $2 billion as part of a broader restructuring effort. However, in the long run, building construction will result in businesses paying higher maintenance costs and labor costs.
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When it comes to technology, the company is reviewing “all contracts and services,” according to the presentation. In some cases, this involves building a product that replaces software that engineers would have to make significant adjustments to anyway.
Starbucks has been working for several years to build a point-of-sale system to replace Oracle Simphony, said the people, who were not authorized to speak publicly.
The coffee chain declined to comment. The company said in a blog post earlier this year that advances in AI and other technologies will support its long-term growth and allow baristas to focus more on customer service.
Spokespeople for Microsoft, IBM, and Oracle had no comment.
AI-assisted coding was key to developing a platform to replace IBM tools, according to an internal presentation. Starbucks is encouraging its technology employees to use artificial intelligence and factoring their usage into bonuses, Bloomberg News reported.
There is skepticism about how much or how quickly AI can speed up and automate work. Starbucks recently introduced an AI-powered system to track inventory in its stores, reverting to manual counting. We also continue to use software from third-party vendors, including companies such as Microsoft.
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Starbucks’ enterprise technology team plans to cut its budget by about $30 million in the fiscal year ending at the end of September, according to an internal presentation. This includes approximately $10 million in software spending reductions.
An additional $13 million in savings The main way they do this is by cutting back on contractors from professional services firms and filling some roles with their own staff. Starbucks is opening offices in Nashville and India to house some technology employees, while others will remain at its Seattle headquarters. The company has cut about 2,300 jobs since February last year, including many in the technology industry.
