Everyone uses OpenAI's API. But have you done the math on self-hosting?
The Cloud API Cost
GPT-4o: ~$2.50 per million input tokens. Sounds cheap until you're processing 10M tokens/day for a production app. That's $750/month just for inference.
The Self-Hosted Alternative
A Vultr GPU instance ($90/month) running Llama 3 or Mistral handles the same workload with zero per-token costs. Setup takes an afternoon.
When Cloud Wins
- Prototyping (pay-per-use, no setup)
- Low volume (<1M tokens/day)
- Need cutting-edge models (GPT-4, Claude)
- Don't want to manage infrastructure
When Self-Hosted Wins
- High volume (>5M tokens/day)
- Data privacy requirements
- Predictable costs needed
- Fine-tuned models
The Hybrid Approach
Smart teams use both: self-hosted for routine tasks (80% of volume), cloud APIs for complex reasoning (20%). Total cost drops 60-70%.
The Math
| Scenario | Cloud Only | Self-Hosted | Hybrid |
|---|---|---|---|
| 10M tokens/day | $750/mo | $90/mo | $240/mo |
| 50M tokens/day | $3,750/mo | $270/mo | $850/mo |
At scale, self-hosting pays for itself in the first week.
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