2026/04/29 by David Klotz · 1 voice · 1 citation
Business, Management and Accounting · Computer Science · #Asset specificity #Corporate governance #Digital Platforms and Economics #Enterprise software #Enterprise system #Software #Software Engineering Research #Software Engineering Techniques and Practices #Transaction cost #Vendor #cs.CY
paper · pdf · open access · doi:10.48550/arxiv.2604.26482
published in arXiv (Cornell University) (Cornell University)
openalex publication_date 2026/04/29 · arxiv published 2026/04/29 · openalex created_date 2026/05/01 · arxiv updated 2026/05/02 · openalex updated_date 2026/08/01
Advances in generative artificial intelligence, particularly agentic coding systems capable of autonomous software development, are disrupting the economics of the make-or-buy decision for enterprise applications. The "SaaSocalypse" narrative predicts that AI will render large segments of the Software-as-a-Service market obsolete by enabling firms to build software in-house at a fraction of historical cost. This paper adopts a conceptual research approach, combining transaction cost economics and the resource-based view with an assessment of current AI capabilities, to systematically re-evaluate the factors underlying the make-or-buy decision. It makes three contributions. First, it provides a factor-level analysis of how AI reshapes seven canonical decision determinants: cost, strategic differentiation, asset specificity, vendor lock-in, time-to-market, quality and compliance, and organizational capability. Second, it develops a typology of enterprise applications by their sensitivity to AI-induced shifts in make-or-buy economics. Third, it demonstrates that AI fundamentally transforms the governance properties of the Make option, shifting it from Williamson's pure hierarchy to a hybrid governance form that combines code ownership with external AI infrastructure dependency, with qualitatively different economics, capability requirements, and governance structures than pre-AI in-house development. The analysis finds that the SaaSocalypse thesis is overstated for most enterprise application categories; Make is most compelling for commodity utilities and differentiating custom applications in the AI era, while regulated and mission-critical systems remain predominantly in the buy domain.