Eli5 article review series: Software modernization, buy or build

How Property &Casualty insurers can successfully modernize core systems

Source: McKinsey

Abstract Building from scratch is becoming rarer because it traps an organization's innovation at the go-live date. But buying off-the-shelf software isn't a silver bullet either; it requires adapting the business to fit the software. McKinsey argues that building a custom platform often locks in a company's innovation at the go-live date, and over time, poor documentation makes it impossible to evolve.

Review and insights When diving into an Architecture Review, we rarely see simple, isolated systems; instead, we find that a company's software and processes have become deeply entangled over time. While modernizing, we discussed the following core hurdles:

The Business/IT Divide: Huge implementations often fail because they lack cohesion between business and IT. IT either runs a project without business involvement, or the business buys software with no grasp of the actual IT landscape.

SaaS Conformity vs. Unique Rules: Buying commercial off-the-shelf (COTS) software usually means the business has to adapt its processes to fit the software. But companies often have complex, unique ways of doing things because of strict compliance or contractual reasons.

The Value of the Wrapper: Extending legacy systems with modern wrappers can be a strong, flexible solution for fast time-to-market. While it is not a "forever" solution, extrapolating the data into a new system or adding a functional API layer provides immediate business value to end customers without instantly forcing a complete operational overhaul.

Concluding remarks. It perfectly outlines the dangers of forcing proprietary business rules into a rigid SaaS box, though it underestimates the pragmatic value of targeted, modern wrappers when an organization isn't quite ready for a massive transformation.

Retool's 2026 build vs. buy report reveals 35% of enterprises have already replaced SaaS with custom software

Source: Business Wire / Retool

Abstract AI has completely resurrected the "build" option. While McKinsey recently warned against custom builds, new data shows AI is making custom software development so fast that teams are actively ditching SaaS. 35% of teams have already replaced at least one SaaS tool with a custom build, and 78% expect to build more in 2026. However, this unchecked speed is creating a massive "shadow IT" crisis that CTOs urgently need to address.

Review and insights Because development is outpacing governance, 60% of respondents report building software outside of IT oversight in the past year, with 25% doing it frequently. This creates unique challenges:

The "SaaS-pocalypse": Fueled by LLMs, it is easier than ever to build internal tools that replace single-function SaaS apps. However, spinning up rogue, vibe-coded applications creates a giant problem for information security.

The Shadow IT Explosion: Employees bypass IT because they see organizational governance as "red tape" limiting their speed. If a company doesn't provide secure, approved sandbox environments for rapid AI building, employees will simply use unvetted AI tools, resulting in customer data living in systems with zero authority.

The Need for AI Leadership: Overcoming this requires more than just restricting access. Companies need dedicated AI Officers to educate employees, establish secure internal facilities, and ensure that rapid development doesn't turn into tomorrow's technical debt.

Concluding remarks It shines a stark light on the reality of modern enterprise development: if an organization doesn't control the speed of AI-assisted building, its employees will build outside of its oversight, multiplying its security risks.

Full video episode: Software modernization, buy or build

The first step to start the modernization journey

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