Local LLMs vs Cloud APIs: When to Use Each

The Trade-offs

Cloud APIs (OpenAI, Anthropic, Google) are easy to start with but expensive at scale. Local models (Llama, Mistral, Qwen) require upfront setup but cost almost nothing to run once deployed.

When Cloud APIs Make Sense

• Low volume (under 100K tokens/day)
• Need the absolute best model quality
• No sensitive data involved
• Quick prototyping and testing

When Local Models Win

• High volume (1M+ tokens/day)
• Sensitive or regulated data
• Need predictable costs
• Want zero external dependencies

The Hybrid Approach

Most of our deployments use both. Local models handle the bulk of routine tasks, while cloud APIs are reserved for complex reasoning that requires frontier models. This typically cuts costs by 70-80% while maintaining quality where it matters.