Market reaction
Shares of IBM, ServiceNow and Salesforce fell in premarket trading on Thursday after reports that Starbucks is building its own software using artificial intelligence that could replace vendor-supplied applications. In premarket trade, IBM shares were down about 3%, ServiceNow slipped about 3.5% and Salesforce dropped roughly 4% ahead of the opening bell.
What Starbucks is developing
According to an internal presentation referenced in the report, Starbucks is developing internal alternatives to a Microsoft system that tracks inventory and to an IBM tool used for maintenance management. The presentation indicates that some of the internally developed software could be deployed by the end of next year, subject to testing outcomes.
Cost control and contract review
The report notes Starbucks spends roughly $400 million annually on software. Chief Technology Officer Anand Varadarajan is reported to have told employees earlier this year that there are "clear opportunities to reduce the spend in software," according to a recording of an internal meeting reviewed for the report. As part of a broader push to cut $2 billion in costs, Starbucks is said to be reviewing "every contract and service."
Separately, the company has for several years been working on its own point-of-sale system intended to replace Oracle Simphony, the report says.
Enterprise technology budget targets
The presentation cited in the report shows the Starbucks enterprise technology team is targeting about $30 million in budget reductions for the fiscal year ending in late September. That figure reportedly includes approximately $10 million in software spending cuts.
Broader market context
Market commentary in the report links the Starbucks program to wider concerns among software companies about competition from AI-built products, whether developed by startups or by customers themselves. The trend has been cited as a factor weighing on software stocks this year.
Summary
Reported efforts by Starbucks to build in-house AI software to replace certain third-party applications coincided with measurable premarket declines in the shares of several large enterprise software vendors. Starbucks is reviewing contracts as part of a cost reduction program and expects some internally developed tools could be rolled out after successful testing.