Key Takeaways
- Starbucks spends about $400 million every year on software alone, according to chief technology officer Anand Varadarajan.
- The coffee chain is now developing software tools in-house as part of its broader turnaround strategy to cut $2 billion in costs.
Starbucks buys products from companies like Microsoft and IBM, spending hundreds of millions of dollars on software alone — but not for much longer.
A leaked internal presentation recently reviewed by Bloomberg News showed that Starbucks is developing its own in-house alternatives to software offerings it usually purchases from tech giants. The coffee chain is creating its own solution to a Microsoft system that monitors inventory, as well as an IBM product that oversees maintenance.
Bloomberg noted that Starbucks could roll out some of this internally developed software by the end of 2027, depending on how well the tools perform in tests.
The outlet said that businesses like Starbucks were tied to technology vendors for years because of the complexity of building tools and the disruption caused by changing software. Now, AI is transforming the landscape by making it simpler to create software from scratch.
Starbucks is aiming to cut $2 billion in spending
Starbucks’ chief technology officer, Anand Varadarajan, disclosed in a meeting earlier this year that the company spends about $400 million just on software. “There’s clear opportunities to reduce the spend,” Varadarajan said, per a meeting recording seen by Bloomberg.
Building custom software in-house can help reduce costs. Starbucks wants to cut $2 billion in spending as part of an overall turnaround strategy. However, creating software can also lead to steeper maintenance and labor expenses down the road.
The leaked presentation revealed that Starbucks is looking into “every contract and service” and creating its own software solutions to replace tools that engineers have to heavily modify. For example, the company has been tinkering with a point-of-sale system for several years to replace Oracle’s Simphony platform, per Bloomberg. A point-of-sale system allows a business to process customer transactions at the moment of purchase. It handles core tasks such as ringing up items, calculating totals and taxes, accepting payments and issuing receipts.
What businesses can learn from Starbucks
According to Bloomberg, businesses can treat Starbucks’ shift away from Microsoft and IBM as a blueprint for how to cut software costs while adding AI tools.
Starbucks’ enterprise technology team expects budget savings of about $30 million this fiscal year, including $10 million in software savings. Executives see potential in building tailored applications instead of borrowing everything from big vendors, per Bloomberg.
The outlet adds that businesses should treat AI as a driving force behind internal development instead of just another software feature. AI-driven coding tools have made it easier for Starbucks engineers to build new platforms fast enough to compete with established software programs. This allows business leaders to identify areas where custom software could result in advantages, then apply AI to accelerate those builds.
Additionally, by reducing its reliance on Microsoft and IBM, Starbucks is diversifying its tech offerings. This approach encourages businesses to identify which processes rely on a few external providers and to create viable alternatives. Bloomberg noted that internal tools do not have to replace commercial software overnight. They can instead start as targeted substitutes for the most expensive or limited products.
Key Takeaways
- Starbucks spends about $400 million every year on software alone, according to chief technology officer Anand Varadarajan.
- The coffee chain is now developing software tools in-house as part of its broader turnaround strategy to cut $2 billion in costs.
Starbucks buys products from companies like Microsoft and IBM, spending hundreds of millions of dollars on software alone — but not for much longer.
A leaked internal presentation recently reviewed by Bloomberg News showed that Starbucks is developing its own in-house alternatives to software offerings it usually purchases from tech giants. The coffee chain is creating its own solution to a Microsoft system that monitors inventory, as well as an IBM product that oversees maintenance.
Bloomberg noted that Starbucks could roll out some of this internally developed software by the end of 2027, depending on how well the tools perform in tests.
