With generative AI tools making code generation faster and cheaper than ever, Private Equity deal teams and portfolio company executives are re-examining off-the-shelf SaaS software. Why pay six-figure SaaS subscriptions when an engineer can spin up a custom tool in days? In Episode 17, Paul and Dave re-evaluate the classic "Buy vs. Build" decision through an operational and P&L lens.

Revisiting Jeff Bezos’s concept of "undifferentiated heavy lifting," Dave and Paul outline why code generation is only a fraction of the true cost of software ownership. They analyze real-world case studies—including how one portfolio company built a custom database engine that slashed COGS by 70%, while TZP Group built a custom CRM for $125/month, against the hidden operational taxes of 24/7 on-call rotations, uptime SLAs, and testing for data correctness.

Key Takeaways:

• The "Undifferentiated Heavy Lifting" Test: AI makes writing code fast, but it doesn't eliminate operational overhead. If a software tool doesn't create a defensible competitive moat, building it internally distracts valuable engineering capacity from core revenue-generating features.

• The Hidden On-Call Reliability Tax: Building software means owning software. Maintaining 24/7 uptime for critical applications requires at least a 3-person on-call rotation to prevent developer burnout and avoid catastrophic production downtime (where 10 minutes of downtime can burn $100,000 in revenue).

• Proving System Correctness: AI agents generate code quickly, but "hope is not a strategy". Systems processing financial data or high-volume transactions must prove 100% data correctness over time to prevent silent, compounding revenue leakage.

• High-Leverage Custom Builds (The 70% COGS Slash): Building custom software is worth the investment when it directly transforms unit economics—such as replacing an off-the-shelf database to cut infrastructure COGS by 70% or replacing overpriced, flat SaaS databases with tailored internal workflow tools.

• The Future of Enterprise SaaS: Dave presents his hot take on why SaaS vendors will soon offer deep, AI-driven customization to prevent clients from building homegrown alternatives.