When Small Businesses Build Their Own Software
AI-built internal tools could let small businesses keep efficiency gains that once flowed to software vendors.
Developed from a conversation between Pete Winn, Rod Bishop and Andy David
Software has traditionally captured part of the value it creates. Rod gives the example of a small business that could save $1 million through new efficiencies, then willingly pay $500,000 in licensing fees because the purchase still leaves it better off. The business keeps half the gain while a software vendor collects the rest, often by selling the same broadly useful product across many customers.
Cheap software changes that bargain. A business can build tools around its own workflow rather than accept a standard product designed to satisfy most customers most of the time. Rod’s deliberately narrow example is a CRM for left-handed blue-widget makers. Pete extends the point to support functions such as internal systems, which can be shaped around the particular value stream, geography, tax rules and regulatory demands of the business using them.
Once those tools can be created locally, the small business no longer needs to surrender half of a $1 million efficiency gain to an outside software supplier. It can keep the margin while using software that fits its operation more closely. Instead of accumulating in a distant SaaS company, more of the value returns to the business that turns an input into a better output.