Artificial Intelligence Reduces Software Development Costs

The logic used to be that buying software was cheaper, faster, and safer for most use cases. Building was reserved for companies with large engineering teams and specific problems. However, the cost of coding software has now dropped to zero, allowing anyone to create their own solutions. Yet, enterprise governance models have not kept pace with this change.

According to Retool's 2026 Build vs. Buy Shift Report, based on a survey of 817 builders, the cost of building software has significantly decreased while SaaS pricing has remained unchanged. Two years ago, creating a custom internal tool could take weeks and cost six figures. Today, an operations lead can have a working prototype in a day or two using the right platform. This structural shift is driven by AI-assisted development and the maturation of enterprise app-building platforms.

The data reveals that 35% of teams have already replaced at least one SaaS tool with a custom build, and 78% plan to create more custom tools in 2026. Workflow automation and internal admin tools are among the most vulnerable to replacement, often failing to meet the specific needs of companies.

The shift is not happening uniformly. The most commonly replaced tools include workflow automation (35%) and internal admin tools (33%). These tools often do not fit off-the-shelf software solutions, as internal workflows are unique to each organization. As a result, companies are starting to seek affordable alternatives that better suit their needs.

The report also highlights that 60% of builders have created tools outside of IT oversight, indicating procurement process challenges. Notably, 64% of respondents hold senior managerial positions. Existing procurement cycles were not designed for a world where software development takes days rather than months, creating the risk that tools built in an ungoverned environment may fail to deliver their intended value.

The importance of governance in this new reality becomes clear. Ungoverned building invites security risks and complicates ROI assessments. As shown by Deloitte's survey, 73% of leaders consider data privacy and security the top AI concern. Companies must find a balance between speed of development and security to avoid negative consequences from shadow IT.