Starbucks uses AI push to build more of its own software
Bloomberg News reported the coffee chain is testing internal tools that could replace some Microsoft and IBM software as it seeks lower costs.
By Maya Lindqvist · Senior Technology Correspondent
3 min read
Starbucks is developing AI-assisted software tools that could take over work now handled by some outside vendors, Bloomberg News reported. The effort matters because it shows a large corporate customer testing whether artificial intelligence can help it reduce dependence on major software suppliers.
The coffee chain is building its own alternatives to a Microsoft inventory system and an IBM maintenance-management tool, according to an internal presentation reviewed by Bloomberg News. Some of those internal products could be introduced by the end of next year if testing supports a rollout, Bloomberg reported.
The work comes as companies reassess long-running technology contracts, Bloomberg News reported. Businesses have often stayed with large vendors because replacing core systems can disrupt operations and requires specialized engineering work, but AI-assisted development is changing how some companies weigh buying software against building it themselves.
Starbucks spends about $400 million a year on software, Chief Technology Officer Anand Varadarajan told employees in an internal forum earlier this year, according to a recording reviewed by Bloomberg News. Varadarajan said there were clear chances to lower software spending, Bloomberg reported.
The company is trying to cut $2 billion in costs as part of a wider turnaround plan, according to Bloomberg News. Building software internally can reduce vendor bills, though Bloomberg noted that it can also bring higher labor and maintenance costs over time.
Starbucks is reviewing “every contract and service” in technology, according to the internal presentation cited by Bloomberg News. In some cases, the company is considering replacing software that its engineers already have to customize heavily, Bloomberg reported.
The company has also spent several years developing a point-of-sale system that could replace Oracle Simphony, people familiar with the matter told Bloomberg News. Those people were not authorized to discuss the work publicly, Bloomberg reported.
Starbucks declined to comment to Bloomberg News. In a blog post earlier this year, the company said AI and other technology improvements would support long-term growth and help baristas spend more time on customer service.
Microsoft, IBM and Oracle spokespeople did not provide comment to Bloomberg News. Shares of Microsoft and IBM fell in premarket trading Thursday, with Microsoft down about 1.5% and IBM down 4%, Bloomberg reported.
Bloomberg News reported that investors have become more concerned this year about whether established software companies can protect their businesses from AI-built products made by startups or by customers themselves. Microsoft and IBM have both lagged the S&P 500 this year, according to Bloomberg.
AI-assisted coding played a central role in building the platform that could replace the IBM tool, according to the internal presentation reviewed by Bloomberg News. Bloomberg has reported that Starbucks has pushed its technology workers to use AI and has factored AI use into some bonuses.
The company’s experience with AI has been mixed, Bloomberg News reported. Starbucks recently stopped using an AI-powered inventory-tracking system in stores and returned to manual counting, while it continues to use outside software from vendors including Microsoft.
The Starbucks enterprise technology team is on pace to lower its budget by about $30 million in the fiscal year ending in late September, according to the internal presentation cited by Bloomberg News. That figure includes about $10 million in software savings and another $13 million mostly from reducing contractor spending and filling some work with employees, Bloomberg reported.
Bloomberg News reported that Starbucks is establishing offices in Nashville and India for some technology workers, while others remain in Seattle. The company has cut about 2,300 jobs since February of last year, including many technology roles, according to Bloomberg.
This story draws on original reporting from Fortune.