Decision Axes Framework

Evaluating the trade-offs between Local Intelligence and Cloud APIs.

> EXEC_SUMMARY

The choice to run on-premise is rarely about "performance" alone. It is a strategic decision balancing Privacy Risk, Capital Expenditure, and Operational Complexity.

Use this framework to visualize where your organization sits on the spectrum.

01. Security & Privacy

Cloud API

  • Contractual Trust (SOC2, HIPAA)
  • Data traverses public internet
  • Provider *can* see data (unless Zero Access)
TRUST BOUNDARY

On-Premise

  • Physical Trust (Air-Gapped)
  • Data stays on owned metal
  • Zero leakage risk by design

02. Total Cost of Ownership (TCO)

Cloud API

  • Opex (Operating Expense)
  • Pay per Token
  • Scales linearly with usage
  • Best for: Spiky/Low volume
CAPEX vs OPEX

On-Premise

  • Capex (Capital Expense)
  • Pay for Silicon + Energy
  • Near-zero marginal cost per token
  • Best for: 24/7 heavy volume

03. Reliability & Control

Cloud API

  • Forced Deprecations
  • Model Weight Changes
  • Rate Limits / Service Outages
SYSTEM SOVEREIGNTY

On-Premise

  • Frozen Weights (Forever Version)
  • No Rate Limits
  • Full uptime control

04. Talent Requirement

Cloud API

  • Software Engineering
  • REST API Integration
  • Low Friction
OPERATIONAL DRAG

On-Premise

  • ML Ops / DevOps
  • CUDA / Hardware Debugging
  • High Friction

05. Model Capability Access

Cloud API

  • Frontier closed models, day one
  • Newest capabilities first
  • No hardware ceiling
FRONTIER GAP

On-Premise

  • Open-weight models only
  • Sufficient for most enterprise tasks (esp. with RAG)
  • Gap persists at hardest reasoning edge

Mitigation: routing — serve the bulk locally, escalate flagged-hard requests to an API under a data-classification rule. Most "on-prem" programs are 95%-local-with-an-escape-valve.

06. Latency & Data Gravity

Cloud API

  • Network round-trip on every call
  • Context shipped out per query
  • Unusable offline / air-gapped
PROXIMITY

On-Premise

  • LAN latency, deterministic
  • Inference lives where the data lives (ERP, MES, archives)
  • Works in isolated networks / factories

07. Compliance & Auditability

Cloud API

  • Vendor attestations (SOC2, DPAs)
  • Model can change under your validation
  • Audit stops at the API boundary
EVIDENCE CHAIN

On-Premise

  • Full-pipeline inspection (weights, prompts, logs)
  • Frozen model versions = stable validation
  • EU AI Act / GDPR evidence by construction

The AI Act applies by use case, not by infrastructure — on-prem doesn't exempt you, it makes the evidence easier. See the EU AI Act guide.

> RUN_FRAMEWORK --workload

How to actually use this — per workload, not per company:

  1. Weight the axes. A pharma document assistant weights Axis 1 and 7 at maximum; a marketing-copy tool barely registers them.
  2. Score both columns 1–5 for your specific workload — utilization estimates (Axis 2) must be honest; most teams overestimate volume and underestimate idle time.
  3. Any hard constraint wins outright. "This data class may not leave the building" ends the analysis for that workload — the remaining axes only choose how to run locally, not whether.
  4. Mixed scores → hybrid. Split by data class and by difficulty; own the steady base load, rent the bursts.
  5. Re-run yearly. Open-model quality, GPU prices and your utilization all move; the answer has a shelf life.

Bad reasons to go on-prem (heard in the wild): "the cloud is hype", "we already bought a GPU", "security" without a threat model. Bad reasons to stay on APIs: "local models are toys" (dated by ~2 years), "we'll migrate later" with no portability layer — later never comes cheap.