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Cloud, private cloud, or on-prem for AI?

Choose the deployment that fits your constraints, not the one that sounds most secure.

Before comparing options, clarify the terms. Public cloud uses a provider’s shared infrastructure. Private cloud is reserved for one organisation, but it can be hosted by a provider or operated locally. On-premises means the infrastructure runs at your own facilities. A private cloud can therefore also be on-premises.

The decision comes down to data handling, performance, operating responsibility, and total cost.

OptionWhy consider itWhat to check
Public cloud or managed AI serviceRapid setup and flexible capacityData handling, service limits, and usage charges
Hosted private cloudInfrastructure dedicated to your organisationIsolation, administrator access, and contractual responsibilities
On-premisesLocal operation and direct infrastructure controlStaffing, maintenance, capacity, and recovery arrangements

Treat this as a shortlist, not a final verdict. The actual architecture, contract, and operating controls matter more than the deployment label.

Follow the data

Check where documents, prompts, answers, and logs go. A locally hosted model does not make the whole application private if another component sends information to an external service. Assess the entire system and its dependencies.

Test actual response times

Local infrastructure is not automatically faster. Retrieval, model size, available hardware, and request queues all affect the experience. Test a realistic workload, including busy periods.

Compare the complete bill

For on-premises deployment, include hardware, power, cooling, maintenance, staff, and future expansion. Comparing a cloud invoice with only the purchase price of a server gives an incomplete picture.

Your decision checklist:

  • What information may leave your environment?
  • Who may administer the service and inspect its logs?
  • What response time must it meet under peak demand?
  • Who will maintain and recover it?
  • What is the total cost at expected usage?
  • How will capacity grow if adoption increases?

Use these answers to eliminate unsuitable options before comparing vendors or buying hardware.

Related: Cloud and platform engineering