Most teams reach for a public LLM API first because it is the fastest way to a working prototype. But for the customers we build for, the deciding question is rarely quality. It is where the data is allowed to go. A prompt that leaves the perimeter is, for many railway and defence workloads, a compliance event on its own.

Here is how the two approaches actually compare on the axes that matter once you move past the demo.

DimensionOn-prem private LLMPublic LLM API
Data residencyStays inside your network; nothing leaves the perimeterPrompts and context transit a third-party cloud
LatencyPredictable on local hardware; no round-trip to a vendorDepends on the vendor and your uplink
Upfront costHigher: you provision and own the GPUsNear-zero to start
Cost at scaleFlattens; you pay for hardware, not per tokenGrows with every request
Model freshnessYou choose when to upgrade weightsVendor ships improvements continuously
Operational burdenYou run inference, patching, and fleet healthVendor handles the infrastructure

How we think about the choice

There is no universal winner, only a workload. When the data is sensitive, the site is air-gapped, or the request volume is high and steady, a private model on hardware you control usually wins on both compliance and long-run cost. When you are exploring, volumes are low, and the data is non-sensitive, a public API gets you moving faster.

Where we can help is the harder middle: standing up a private LLM that meets RDSO realities without pretending the operational cost is zero. If you are weighing this trade-off for a regulated deployment, talk to us.