Should you run LLMs locally?
When local AI models outperform API-based services
- Article
- AI & Data Science
- Data Engineering


Large Language Models (LLMs) have quickly become a standard component in modern applications. Most developers start by integrating models such as OpenAI, Claude or similar providers through APIs. It is fast, convenient and requires very little infrastructure.
But what happens when:
- API costs suddenly increase?
- A provider updates a model and your prompts stop working?
- You need to process sensitive data that cannot leave your environment?
For organisations working with proprietary data, high request volumes or strict compliance requirements, running open-source LLMs locally is becoming an increasingly attractive alternative.
In this article, we explain when local LLM deployment makes sense, how to get started, and what infrastructure you need to move from experimentation to production.
Why not just use API-based LLMs?
API services such as OpenAI or Anthropic offer powerful models that are easy to integrate. For many use cases, they remain the simplest option.
However, there are situations where local models offer clear advantages.

When running LLMs locally becomes attractive
Local deployment becomes particularly valuable when:
- You process sensitive or regulated data
- Usage volumes become large and predictable
- API costs grow significantly
- You need stable and reproducible model behaviour
Understanding local LLM deployment
Running LLMs locally involves several components. To simplify the landscape, we divide the process into five key areas:
- Local development tools
- Interfaces and user experience
- Model selection and performance
- Deployment infrastructure
- Cost considerations
1. Local development tools
Before deploying models in production, you will typically start by testing them locally. Two tools make this particularly straightforward:

Both tools allow you to prototype locally before committing to production infrastructure.
In practice, LM Studio is often preferred for quick testing, while Ollama offers more flexibility for automation and integration.
2. Interface and user experience
Once models run locally, you need a way to interact with them.
While LM Studio and Ollama include basic chat interfaces, many teams prefer a dedicated interface layer.
Open WebUI provides a modern web interface similar to ChatGPT, but connected to your own models.
Key capabilities:
- Connect to multiple model backends
- Compare model responses side-by-side
- Share access with team members
- Manage conversation history
- Upload documents for context
This makes it especially useful when you want to give non-technical colleagues access to local AI tools.
3. Model selection and performance
Choosing the right model is essential when running LLMs locally. Model size is typically measured in parameters (billions).

For many organisations, mid-size models around 70B parameters provide the best balance between performance and infrastructure cost. Smaller models can handle high-volume, simpler tasks, while larger models are typically reserved for specialised workloads where maximum capability is required.
4. Deployment and infrastructure
Once you move beyond experimentation, you need infrastructure capable of serving models reliably.
Running models locally
Your own laptop or workstation is often sufficient for development.
This works well when:
- testing integrations
- experimenting with prompts
- running smaller models
Deploying to GPU virtual machines
For production workloads, a GPU-enabled VM is typically required.
This is necessary when:
- multiple users access the model
- uptime and reliability are important
- larger models require more VRAM
- higher throughput is required
Typical deployment setup
A common architecture includes:
- GPU VM
- Ollama running the model
- Nginx reverse proxy
- client applications connecting via API
This setup provides an OpenAI-compatible endpoint that you control entirely.
5. Cost considerations
There are generally three ways to serve LLMs:

When does local deployment make sense?
Local models are particularly valuable when:
- Workloads are high volume and predictable
- Batch processing tasks analyse large datasets
- Multiple use cases share the same infrastructure
- Data privacy requirements prevent external sharing
Many organisations adopt a hybrid strategy, combining local models with external APIs depending on the task.
Conclusion
Running open-source LLMs locally gives organisations significantly more control over their AI infrastructure.
You gain:
- full data privacy
- predictable infrastructure costs
- independence from API rate limits
- stable model behaviour in production
For teams exploring this approach, a practical path forward is:
- Start small
- Experiment locally using tools such as LM Studio or Ollama.
- Choose the right model
- Match model size to the complexity of your task.
- Scale thoughtfully
When moving to production, evaluate whether a budget GPU provider or a major cloud platform fits your architecture best.
Local LLMs are not always the right solution, but for many organisations they give greater flexibility, control and cost efficiency in modern AI systems.
This is an article by Bob Strube
Bob is a Data Engineer at Digital Power, specialising in AI and scalable data platforms. He has built and deployed machine learning and GenAI solutions on Azure and Databricks. He helps organisations move from experimentation to production with reliable, cost-efficient and privacy-conscious infrastructure.
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It is now clear to most companies: data-driven decisions by Data Science add concrete value to business operations. Whether your goal is to build better marketing campaigns, perform preventive maintenance on your machines or fight fraud more effectively, there are applications for Data Science in every industry.
A Career as a Data Engineer? Shape your training
In June 2020, Sander became part of our team. Although he started in the middle of corona time, he soon noticed that he was greatly stimulated to make contact with his new colleagues. This largely came naturally as part of our onboarding program: "This matched perfectly to my needs: I started calling many colleagues myself to get acquainted! "Read how Sander designs his own training as a data engineer."
The foundation for Data Engineering: solid data pipelines
Basically, Data Engineers work on data pipelines. These are data processes that can retrieve data from a certain place and write it in somewhere. In this article you can read more about how data pipelines work and discover why they are so important for a solid data infrastructure.
Social listening in the real estate market
Vesteda was curious if social listening – monitoring and analysing social media discussions about a brand, competitors, products or hashtags/keywords – could add value to the organisation. To this end, we started a project that consisted of two parts: exploring possibilities for social listening in the Corporate Communication department and applying social listening in an ongoing Data Science project.
What is a data architecture?
Working in a data-driven way helps you make better decisions. The better your data quality, the more you can rely on it. A good data architecture is a basic ingredient for data-driven working. In this article, we explain what a data architecture is and what a Data Architect does.
Social Network Analysis at Election Time
Tuesday, 3 March 2020, was known as Super Tuesday, the day on which several American states vote simultaneously for the Democratic presidential candidate. We use this day as a case for the application of Social Network Analysis. This example is about elections, but you can also apply the same method to a commercial case where you replace the names of the candidates with, for example, different brand names.
How to use Social Network Analysis to understand public opinion
The Corona measures are a much discussed topic on Twitter. The crisis team not only fights against Corona's effects on public health, but also tries to maintain legitimacy for the decision to keep certain measures in place among the public. With this practical case we explain how you can make public opinion on Twitter transparent with Social Network Analysis.
Social Network Analysis: how to gain insight into social media networks
If your organisation is active on social media and you want to optimise the online strategy, you need to know what is happening online around you and the impact of your activities. Social Network Analysis can help you with that. We explain what it is, how it works and the purposes it serves.
How text analysis helps RNW Media to listen and take action
RNW Media builds online communities in countries with limited freedoms. In these communities, young people can read and discuss sexual and reproductive health and rights (SRHR) and civil rights. In addition, RNW Media is working on advocacy – putting the interests of young people on the map with governments.
Measurable impact on social change using a data lake
RNW Media is an NGO that focuses on countries where there is limited freedom of expression. The organisation tries to make an impact through online channels such as social media and websites. To measure that impact, RNW Media drew up a Theory of Change (a kind of KPI framework for NGOs).
How do you find the right data scientist?
More and more organisations are getting started with data science. A logical consequence of this is clearly a growing number of related vacancies. But how do you set up a useful job description for a data scientist – and mostly: how do you actually pick the right one? We're giving you some hints on what to do, and what not.
From ethical data to action
The introduction of the new privacy law (GDPR) in 2018 has ensured that many organisations put privacy high on the agenda. In this article you can read about the 5 ethical risks of working digitally and using data. We also share a concrete solution: the Responsible Data Framework.
Determining the location of gardens using Data Science
Residential investor Vesteda is working on a new website. If an available rental home has a garden, the location of the garden must be listed on the webpage of that home. This information was not yet available in the database. We were instructed to determine the location of the garden based on the coordinates of the homes.
How does Data Science work in daily practice?
Organisations wanting to get started with data quickly ask for Data Science solutions. Data Science is often seen as the holy grail of data-driven working. But what does a successful Data Science project actually look like in practice? And how can it serve your organisation? In this series of articles, we take you through all the elements you need to achieve success for your organisation with Data Science.
Application of Natural Language Processing (NLP) and text mining for process improvement.
Fair Wear is a non-profit organisation that aims to improve the working conditions of employees in garment factories. The NGO has collected a lot of documentation about its activities in recent years, for example in the form of reports from a complaint line for factory employees, reports of audits that check whether factories comply with the guidelines, and reports of training for factory employees. This information is stored as typed text, usually in Word or PDF format.
Reliable insight into crowds on trains and stations using an algorithm
An increasing number of people are traveling by public transportation. Several stations in The Netherlands are being rebuilt or renovated to keep up with the growing number of train passengers. For the rebuilding and layout plans, information was needed on station traffic. NS Stations also wanted to improve transfer safety in collaboration with ProRail.
Digital transformation and better internal collaboration thanks to insight into offline and online data.
Publisher Malmberg collects a lot of offline and online data. More and more educational institutions are using online licenses in addition to (or instead of) printed teaching materials. To properly make use of this, Malmberg uses monthly reports. The in-house data team compiles these as input for specific departments. Malmberg asked us to strengthen this team and make the internal processes around data more efficient.