One in three AI-using firms forgo some software buys: McKinsey

BENGALURU: Nearly one in three respondents at organisations that regularly use artificial intelligence said their companies had decided against buying at least one software product or feature. They built the required functionality in-house using AI coding tools instead, according to McKinsey’s State of AI in 2026 report.The finding points to an emerging shift in how companies allocate technology budgets. AI coding agents can plan and execute multi-step software-development tasks with less human intervention. This is giving companies another option beyond buying packaged software from an external vendor.The trend was strongest in the technology sector. Around 41% of respondents from technology companies said their organisations had forgone at least one software purchase in favour of an internal build. The share was 39% in healthcare, 38% each in professional services and energy and materials, and 36% among financial institutions.“The rise of software coding agents and in-house development is one clear sign of this broader shift,” McKinsey senior partner Lieven Van der Veken said in the report. He added that this did not mean companies would build everything themselves or stop working with technology partners. They were becoming more deliberate about what to buy and what to develop internally.Large companies are moving faster. Among respondents from organisations with at least $1 billion in annual revenue, 31% said software coding agents were being scaled across the enterprise. The corresponding share among smaller organisations was 17%.Overall, 89% of respondents said their organisations regularly used AI in at least one business function. The share reporting that AI was being scaled across the enterprise rose to 44% from 38% a year earlier.However, wider adoption has not yet translated into a similar increase in financial returns. Only 37% said AI had made a positive contribution to their organisations’ earnings before interest and taxes. That was largely unchanged from 2025. In contrast, 80% said AI had improved their individual productivity and half said it helped them make better decisions.Costs are also emerging as a constraint. One in five respondents said AI-related operating expenses, including the cost of processing tokens, had limited its use at their organisations. Yet 60% expected their companies to increase AI investments over the next year.Expectations of job losses have also run ahead of actual changes. Last year, 32% expected AI to reduce their organisation’s workforce. Only 14% now said such a decline had occurred over the past year. However, 39% again expect workforce reductions in the coming year.McKinsey surveyed 1,719 participants across 97 countries between May 4 and June 8. The report did not provide India-specific findings.Get the latest Business News and Live updates. Download the TOI app.