Story
Starbucks Developing In-House AI to Replace Microsoft, IBM Software in Cost-Cutting Push
Summary
The coffee giant is reportedly building its own AI-powered software for inventory and maintenance, aiming to reduce its $400 million annual software spend as part of a wider $2 billion cost-saving plan.
Starbucks Corp. is developing proprietary software tools using artificial intelligence to potentially replace applications it currently licenses from technology giants like Microsoft Corp. and IBM Corp. The initiative is part of a broad corporate restructuring aimed at significantly reducing operational costs, according to a Bloomberg report citing an internal company presentation.
A Push to Reduce Software Spending
The move is a key component of a larger effort to cut $2 billion in costs. According to an internal forum held earlier this year, Starbucks Chief Technology Officer Anand Varadarajan stated the company spends approximately $400 million annually on software. "There's clear opportunities to reduce the spend in software," Varadarajan said.
The company is reviewing "every contract and service" related to technology. The in-house development specifically targets:
- A Microsoft system used for inventory tracking.
- An IBM tool for maintenance management.
According to the report, some of the internally developed software could be launched by the end of next year, pending the results of testing.
AdBroader Tech Overhaul
Starbucks is encouraging its technology employees to leverage AI in their work, reportedly factoring its usage into their bonuses. AI-assisted coding was instrumental in creating the platform intended to replace the IBM tool. The company has also been working for several years to build its own point-of-sale system to supplant Oracle's Simphony platform.
These efforts are part of a wider restructuring within the company's technology division. The enterprise technology team is on track to cut its budget by about $30 million in the current fiscal year, which ends in late September. This includes savings of approximately $10 million in software spending and another $13 million from reducing the use of contractors from professional services firms.
Context and Restructuring
The technology shift coincides with significant changes to the company's workforce and physical footprint. Starbucks has eliminated about 2,300 jobs since February of last year, with many of those roles in technology. The company is also establishing new offices in Nashville and India to house some tech workers, while others will continue to operate from its Seattle headquarters.