Private vs Public AI: Trade-offs for Australian Businesses

The trade-offs between cloud-hosted AI services and self-hosted models. Privacy, cost, performance, and control: what to consider.

The core choice

When deploying AI for your business, one of the first decisions is where the AI runs and where your data goes. The spectrum runs from fully public (cloud API) to fully private (self-hosted on your own infrastructure).

Public AI (cloud-hosted)

Public AI means using cloud services like OpenAI's API, Google Gemini, or Anthropic's Claude directly. Your data is sent to their servers for processing.

  • Pros: Easiest to start, no infrastructure to manage, always up-to-date models, lowest upfront cost.
  • Cons: Data leaves your control, potential training data usage, higher per-query cost at scale, dependency on vendor availability.

Private AI (self-hosted)

Private AI means running models on your own infrastructure: on-premises servers, your own AWS account, or dedicated cloud instances. Open-source models like Llama 3, Mistral, and Phi can be self-hosted.

  • Pros: Full data control, no data leaves your environment, no vendor dependency, no per-query API cost.
  • Cons: Higher upfront cost, requires ML ops capability, models may be less capable than frontier options, you manage updates and scaling.

The middle ground: AWS Bedrock. Use frontier models (Claude, Mistral) via API, but your data stays within your AWS account and VPC. Not used for training. Best of both worlds for many use cases.

Comparison table

FactorPublic APIAWS BedrockSelf-Hosted
Data locationVendor serversYour AWS accountYour infrastructure
Model qualityFrontierFrontierGood (open-source)
Setup effortMinutesHoursDays to weeks
Per-query costMediumMediumLow (after setup)
Infrastructure costNoneAWS servicesGPU instances
PrivacyVariesStrongMaximum
Ops burdenNoneLowHigh

The hybrid approach

Most of our clients end up with a hybrid:

  • AWS Bedrock for production RAG systems and customer-facing AI, with strong models and data isolation.
  • Public APIs (ChatGPT, Claude) for internal productivity: drafting, brainstorming, coding where data sensitivity is low.
  • Self-hosted models for specific use cases requiring maximum privacy or offline access.

Our recommendations

  • Sensitive customer data: Bedrock or self-hosted. Don't send it to public APIs.
  • Internal knowledge systems: Bedrock with VPC endpoints. Data stays in Sydney.
  • General productivity tools: Enterprise plans of ChatGPT or Claude (with training opt-out).
  • Regulated industries: Self-hosted or Bedrock. Document your data flows for compliance.

Key takeaways

  • Public AI is easier and cheaper to start with. Private AI gives you full data control.
  • AWS Bedrock offers a middle ground. Frontier models with data staying in your account.
  • Self-hosting open-source models (Llama, Mistral) gives maximum control but requires ML ops capability.
  • Most businesses use a hybrid: Bedrock/private for sensitive data, public APIs for general tasks.
Kasun Wijayamanna
Kasun Wijayamanna Founder & Lead Developer

Postgraduate Researcher (AI & RAG), Curtin University - Western Australia

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Meet the person

Written by the person who does the work

This article comes from real projects. If it raises a question about your own system, you can ask the founder directly.

HELLO PEOPLE designs, builds and looks after AI, software, app and data solutions for Australian businesses, with senior expertise on every project and a scope agreed before work starts. For AI, that means working on your own data, with a person able to check every answer.

Since 2007, HELLO PEOPLE has delivered more than 100 projects from Perth for small and medium businesses across Australia: custom software and apps, system integrations, data migrations, reporting and dashboards, and AI that works inside the systems a business already runs.

I lead every engagement myself. I trained in accounting before moving into IT, hold accounting and IT professional qualifications and an MBA, and bring more than 20 years of experience across sales, service delivery, inventory and compliance. I am also a PhD candidate in AI at Curtin University, researching retrieval-augmented generation (RAG), so the technology is always judged by what it does for the business.

  • An old-fashioned service

    Small and boutique. The person who scopes your AI project is the person who builds it, and the same person checks its answers before your team relies on them.

  • Quick responses

    No ticket queue and no account manager in between. You hear back within one business day, usually sooner.

  • A long-term partner

    The first AI project is the start, not the end. When you need the next system, integration or report, you call the same person, who already knows your business.

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