Make-or-Buy Decision in the AI Age

Every organization decides which activities to perform internally (make) and which to purchase on the market (buy). The decision compares coordination costs (management, overhead, internal complexity) against transaction costs (search, negotiation, quality verification, risk of misalignment). For most of the twentieth century, knowledge work tilted toward make — internalizing software development, legal analysis, design because the knowledge required was highly firm-specific and the cost of transferring context to external contractors was prohibitive. AI disrupts this by reducing context-transfer costs: an AI system can absorb a company's codebase and documentation in hours rather than the months of onboarding a human contractor requires. The firm-specific knowledge that justified internal organization is no longer exclusively internal. The make-or-buy decision shifts systematically toward buy, or toward a novel third option: make-yourself-with-AI.