RBC Capital Markets' new calculator quantifies the hidden costs of building custom software. The math usually favors buying, but AI tools are shifting the calculus for simpler apps.
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RBC Capital Markets has built an interactive tool to settle the build-versus-buy debate over business software. The calculator lets companies and investors plug in a software subscription cost and compare it against the full expense of building and running an in-house alternative.
The tool goes beyond the initial coding bill. It factors in maintenance, security risks, repairs, and the cost of employees using a tool that may be less reliable or capable. RBC's analysts found that building custom software is usually more expensive than buying it. The math can work for simpler, less important tools, but rarely for core systems such as payroll, customer records, or office software.
The analysis comes as AI coding tools make it easier for companies to create internal apps instead of paying outside providers. That shift raised a tempting question: Why keep buying expensive software when employees can build a custom version themselves? RBC's tool tests that idea with hard numbers.
The biggest hidden cost, the analysts said, may be talent. Even when a custom app is possible, companies must ask whether their best AI workers should rebuild existing software or create something genuinely new. The tool aims to surface that trade-off before a company commits resources.
Enterprise software vendors with sticky subscription models may find some relief in RBC's conclusion. If the math favors buying for core systems, the threat of in-house replacement is smaller than some investors fear. For simpler tools, however, the calculus could shift as AI lowers the barriers to building.
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