How to Convince Your CFO to Make an Investment in AI

The rewards and risks of investing in GenAI for proposal development

This article was originally posted on July 17, 2024 on WashingtonTechnology.com

The decision to acquire an AI platform profoundly impacts cash flow, primarily influenced by capital expenditure and amortization. The choice between hosting the AI platform on-premises or in a virtual private cloud (VPC) further complicates this decision. So, let’s review the rationale for a make, buy, or lease decision you can present to your CFO.  

• Make: Developing in-house AI components gives organizations control over the architecture but comes with varying degrees of responsibility—from building a user interface to developing a complete platform. The development costs of archetypes for in-house models typically range from $0.5M to $200M, and annual sustainment costs between $0.5M and $5M.¹ This approach requires significant resources and can divert focus from market-ready capabilities, making it a costly and time-consuming option.  
• Buy: Purchasing a GenAI model can save time and reduce opportunity costs compared to developing one in-house. Vendors benefit from economies of scale and external investments, lowering initial costs. However, customization to meet specific needs and environments is still necessary, adding to the overall expense.  
• Lease: Leasing GenAI capabilities through Software as a Service (SaaS) offers reduced initial investments and annual sustainment costs. This model outsources development and operation, providing flexibility and scalability. Leasing can be structured per seat, using tokens or other fixed models. This model is often more cost-effective and can deliver acceptable performance compared to making or buying.  

Investing in GenAI for proposal development presents government contractors with several strategic options, each with distinct financial implications. The make, buy, or lease decision and choices about hosting and data integration must be carefully evaluated to balance costs and benefits. So, arm your CFO with these insights and deliver a strong business case for investing in your next AI project. 

By Bruce Feldman, Vice President, Lohfeld Consulting Group

Lohfeld Consulting Group has proven results specializing in helping companies create winning captures and proposals. As the premier capture and proposal services consulting firm focused exclusively on government markets, we provide expert assistance to government contractors in Capture Planning and Strategy, Proposal Management and Writing, Capture and Proposal Process and Infrastructure, and Training. In the last 3 years, we’ve supported over 550 proposals winning more than $170B for our clients—including the Top 10 government contractors. Lohfeld Consulting Group is your “go-to” capture and proposal source! Start winning by contacting us at www.lohfeldconsulting.com and join us on LinkedIn, Facebook, and YouTube^(TM) .

• Footnotes:  
  1: ¹McKinsey Digital, “Technology’s Generational Moment With Generative AI: A CIO and CTO guide,”

Bruce Feldman

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