When a business decides to adopt AI, one of the first questions is: run models on-premise or use cloud APIs? Both approaches have pros and cons. This article provides detailed analysis based on agentic AI's real deployment experience.
Cost Overview
| Item | Cloud API | On-premise |
|---|---|---|
| Setup cost | $0 | $5,000-$20,000 (GPU server) |
| Monthly (100M tokens) | $1,000-$5,000 | $100-$300 (power + hosting) |
| 1 year cost | $12,000-$60,000 | $6,200-$23,600 |
| 3 year cost | $36,000-$180,000 | $8,600-$30,800 |
On-premise has higher setup costs, but the longer you use it, the more you save. With 100M tokens/month volume, businesses can save 50-70% over 3 years compared to cloud API.
Security: On-premise Wins Absolutely
With cloud APIs, your data must be sent to third-party servers. Despite cloud providers' security commitments:
- Sensitive data (finance, healthcare, legal) cannot leave the organization
- Risk of unauthorized internal access (rare but possible)
- Dependent on third-party security policies
- Cannot fully control logging and auditing
With on-premise, data never leaves your infrastructure. Full control over encryption, access, audit logs, and compliance.
Which to Choose?
Choose Cloud if:
- Low volume (<10M tokens/month)
- Need quick POC/testing
- Data is not sensitive
- No GPU infrastructure available
Choose On-premise if:
- High volume (>50M tokens/month)
- Sensitive data, high security requirements
- Need fine-tuning and deep customization
- Low latency required
Hybrid Solution
At agentic AI, we often recommend a hybrid approach: on-premise for primary, sensitive, high-frequency tasks; cloud API for secondary, temporary tasks or when you need the largest model capabilities. This optimizes cost, security, and performance.
agentic AI (aAI) — Artificial Intelligence for Your Business
Contact: contact@agentic-ai.vn | +84 901 333 237