The rapid advancement of AI technology has significantly reduced the cost of building software, yet enterprise governance models have not kept pace. This development, highlighted in Retool’s “2026 Build vs. Buy Shift Report,” underscores a major shift in how businesses approach software solutions. As AI-assisted development becomes more accessible, companies are increasingly opting to build custom tools rather than purchase existing software, raising important questions about governance and security.
### The Changing Cost Curve
Historically, building custom software was an expensive and time-consuming endeavor, often reserved for companies with substantial resources. Today, AI-assisted development and advanced app-building platforms have drastically reduced these costs. The Retool report reveals that 35% of teams have already replaced at least one SaaS tool with a custom-built solution, with 78% planning to build more by 2026. Despite this shift, SaaS pricing models have not adjusted, maintaining per-seat charges for software that often requires additional customization. This discrepancy is prompting companies to reconsider their software strategies, as the cost-benefit analysis now favors building over buying.
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### Impact on SaaS Tools
The trend toward custom-built solutions is not uniform across all software categories. Workflow automations and internal admin tools are among the most frequently replaced, as these tools often fail to meet the specific needs of individual organizations. Purchased software must cater to a broad customer base, resulting in generic solutions that may not align with unique business processes. This has led to a growing preference for custom tools that can be tailored to fit specific organizational requirements, potentially saving millions annually in operational costs.
### Governance Challenges
The shift toward building custom software has also exposed significant governance challenges. Retool’s report indicates that 60% of builders have created tools outside of IT oversight, with 25% doing so regularly. This rise in shadow IT highlights a disconnect between existing procurement processes and the new capabilities of AI-driven development. Without proper governance, these tools can pose security risks and complicate ROI assessments. Organizations must establish governed environments that balance speed and security to effectively manage this transition.
As companies continue to embrace AI-assisted development, the need for robust governance frameworks becomes increasingly critical. Organizations that successfully integrate these frameworks will be better positioned to leverage the benefits of custom software while mitigating potential risks. The evolution of enterprise governance will play a pivotal role in shaping the future landscape of software development and procurement.
