Originally published on AI Tech Connect.
Why distillation exists: the three-way cost trade-off By mid-2026, every team running LLMs at meaningful scale has at least three tools for managing inference costs: caching, routing, and distillation. They are not interchangeable. Each targets a different root cause of overspend, and choosing the wrong one for your workload is how projects deliver disappointing ROI despite months of engineering effort. Caching targets repetition. If the same prompt prefix, the same retrieved context, or the same answer appears repeatedly, caching stops you paying full inference cost on the repeated portion. It is the safest lever — done correctly, it reduces cost without altering the model or the answer. The limit is that it only helps workloads with structural repetition. A high-variety task — where…
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