Local vs Hosted AI: Where Should Your Office Assistant Run?

Write down what runs where

For this comparison, local means the model runs on hardware your organization controls. Hosted means a provider runs the model. Hybrid combines local and hosted components. These labels do not establish where every document, search index, log or backup resides.

Ask the vendor to trace one ordinary request. Which application receives it? Where are approved documents read and indexed? Which model receives the selected text? Where are the answer and diagnostic logs retained? Which service identifies the employee and decides what they may read?

Ollama's official FAQ, for example, separately describes local execution, cloud models and disabling cloud features. The practical lesson is to inspect the configured path. A local model label alone does not describe the behavior of the surrounding application and integrations.

Keep a short inventory with five fields for each component: its purpose, operator, permitted information, location and required connection. Include document search, employee access, logging and backup alongside the model. An unexplained component is a question to resolve before connecting business records.

A synthetic service-office decision

This is a synthetic worked example. The office, documents and requirements are fictional; no customer deployment or measured result is implied. Imagine a Montrose service business that wants office staff to ask questions about its approved visit-closeout procedures. Customer records are outside this first pilot.

Change the requirement and the decision can change. If approved procedure content may be processed by a selected provider and staff need shared access from several locations, a hosted pilot becomes a candidate. Evaluate its permissions, provider terms and outage fallback before choosing it. A hybrid arrangement may fit when different information has different processing rules, but every additional boundary needs a named owner.

The guide to preparing SOPs for an AI assistant covers source approval and version ownership. Resolve that question before treating either deployment as ready for document access.

Compare responsibilities you will still have after setup

Microsoft's shared-responsibility guidance keeps customer data, identities and access within customer responsibility across cloud arrangements. Infrastructure operated by a provider does not remove your business's responsibility for deciding who may read its information.

Ask for a written division of responsibilities: business owner, employee reviewer, implementer, provider and support contact. “Managed” should resolve into specific tasks and response arrangements.

Compare the same full cost categories

A comparison needs more than the cost of a machine or a monthly subscription. Request a scoped estimate for the same workflow and expected workload, with these categories visible:

• Setup: workflow design, document preparation, integration, employee access and acceptance testing.
• Operation: hardware capacity, electricity and replacement for local processing; hosting, subscriptions and model usage where applicable; storage and backup in either arrangement.
• Support: updates, monitoring, connector repairs, recovery, employee training and agreed support coverage.
• Human review: checking answers, correcting sources and handling cases the assistant cannot complete.
• Exit: exporting permitted content, retiring access and moving the workflow if a device, provider or support arrangement changes.

Model licensing and service terms also need review for the intended use. This guide provides no hardware specification, price, savings estimate or universal winner. A representative pilot should supply the evidence needed for that decision.

Run six checks before expanding access

1. Trace a normal answer. Confirm the approved source and the components that received its content. Check whether prompts, retrieved text and logs follow the agreed data path.
2. Remove an employee's access. Verify that the person cannot obtain restricted answers through search, history or a connected tool. Model instructions alone are not an access control.
3. Disconnect each required service. In a controlled test, observe the actual offline or unavailable state. The assistant should report the missing dependency and offer the documented fallback.
4. Ask a question outside the source pack. Check whether the assistant identifies the missing basis and refers the employee to the right person.
5. Try the expected office workload. Record response behavior, review burden and failed requests using the same questions for each candidate arrangement.
6. Rehearse recovery and handoff. Have the named operator restore the agreed service and show how the business can export its permitted information and revoke support access.

Record the input, expected behavior, observed result, reviewer and next action for each check. An unanswered question remains open. If a candidate needs an unapproved connection to finish the task, reconsider the workflow or arrangement before expanding the pilot.

Bring a deployment brief to the first conversation

Describe one employee task, its approved sources, office and field access needs, required behavior during an outage, current software and the people who will review and support it. Use a fictional or redacted example initially; agree on permitted sharing before providing internal documents.

Randall Automation Works' public Local AI Setup and Hosted & Managed AI services cover scoped setup, testing, training and defined support. The AI setup and security overview describes the information and review boundaries to settle first.

If the task itself is still broad, use the first automation project guide to bound it. Then compare the deployment options against that same task, rather than buying hardware or accounts before the workflow is clear.

Primary documentation and public service descriptions checked October 11, 2026. Provider features and terms can change; confirm the selected arrangement when scoping the work.