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Investing.com -- International Business Machines (NYSE:IBM) shares fell 2.5% in premarket trading Monday following news that Starbucks is developing in-house artificial intelligence tools that could replace software applications currently purchased from IBM and other vendors.
Starbucks Corp. is building alternatives to an IBM tool that manages maintenance, according to an internal presentation reviewed by Bloomberg News. The coffee chain is also developing a replacement for a Microsoft system that tracks inventory, with some of the internally developed software potentially rolling out by the end of next year pending testing results.
The news hit sentiment for software stocks, which face mounting concerns about competition from products built by customers using AI. Both Microsoft and IBM have trailed the S&P 500 this year amid these concerns.
Starbucks Chief Technology Officer Anand Varadarajan told workers in an internal forum earlier this year that the company spends approximately $400 million annually on software alone. "There’s clear opportunities to reduce the spend in software," Varadarajan said, according to a recording reviewed by Bloomberg News.
The coffee chain is pursuing in-house software development as part of a broader turnaround effort that aims to cut $2 billion in costs. While building software internally can be cheaper initially, companies may face higher maintenance and labor costs over the long term.
The development highlights growing pressure on leading software companies to defend against competition from AI-powered alternatives, whether from startups or their own customers developing proprietary solutions.
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