When to Self-Host an LLM
Self-host when: (1) API costs exceed $3,000/month, (2) You need <50ms latency, (3) Data can't leave your network, (4) You need full model control. Otherwise, APIs are cheaper and simpler.
The 4 Reasons to Self-Host
1. Cost Threshold: $3,000+/month in API spend
Below $3K/month, the overhead of self-hosting (GPU rental, engineering time, monitoring, updates) exceeds what you'd save. Above $3K/month with consistent throughput, self-hosting a 70B model can reduce costs by 40-60%. The break-even depends on utilization — GPUs you're not using still cost money.
2. Latency: Sub-50ms first-token requirements
API calls include network latency (50-200ms) plus queue time. If your application needs sub-50ms time-to-first-token (real-time voice, gaming, high-frequency trading), self-hosting on local GPUs eliminates network overhead.
3. Data Privacy: Data cannot leave your network
Regulated industries (healthcare, finance, defense) may require that data never leaves your infrastructure. Self-hosting ensures prompts, completions, and fine-tuning data stay on your hardware. Note: some API providers offer on-premises deployments, but at significant cost.
4. Model Control: Fine-tuning, custom inference, research
If you need to modify model weights, run custom inference pipelines, or experiment with architectures, self-hosting gives you full control. APIs only expose what the provider chooses to expose.
Self-Hosting Cost Breakdown
| Setup | Monthly Cost | Good For |
|---|---|---|
| 1x A100 (cloud) | ~$1,100-1,500 | 7B-13B models |
| 2x A100 (cloud) | ~$2,200-3,000 | 34B-70B models |
| 4x A100 (cloud) | ~$4,400-6,000 | 70B+ models, high throughput |
| RunPod spot (A100) | ~$800-1,200 | Non-critical workloads |
| Mac Studio M2 Ultra (owned) | ~$30 electricity | 7B-13B hobby/dev |
When to Stick with APIs
- API spend is under $3,000/month
- You need access to frontier models (GPT-4o, Claude Opus) that aren't open-source
- Your traffic is bursty — GPUs sitting idle waste money
- You don't have ML engineering expertise to maintain infrastructure
- You want the latest model updates without redeployment
Calculate your LLM API costs with KickLLM — free, no sign-up required.