Local AI total-cost worksheet: compare ownership with hosted use fairly

Compare hardware, energy, maintenance, security and staff costs for local AI with subscription, usage, integration and staff costs for hosted AI.

The decision is:

Compare local and hosted options over the same period, for the same workload and at the same output-acceptance standard. Do not claim a break-even point without measured usage and labour.

The scenario is illustrative, not pricing or purchasing advice.

1. Define an equal comparison

Field	Your entry
Workload and comparison period
Tasks per month
Typical input and output
Required acceptance standard
Local candidate
Hosted candidate and subscription
Data permitted for each
Human review method

An accepted output must mean the same thing on both sides. If a local result needs 15 minutes of correction and a hosted result needs two, record that difference. Include labour required by each option rather than charging all review time to one side.

If the hosted service cannot receive the relevant data under the firm’s rules, it is not a valid comparator for that workload. Local execution must also be assessed as a complete workflow, not assumed suitable by location alone.

2. Calculate the illustrative local subtotal

Hardware allocation

A$3,000 allocated evenly over three years:

A$3,000 ÷ 3 = A$1,000 a year

This is a simple management allocation, not tax depreciation. It does not account for financing, residual value or unrelated use of shared hardware.

Incremental electricity

Assume:

• 150 watts, or 0.15 kW;
• four operating hours a day;
• 365 days a year; and
• A$0.30 per kWh.

0.15 × 4 × 365 × A$0.30 = A$65.70 a year

This covers the stated incremental operating power only, not idle use, cooling, networking or backup equipment.

Administration

Two hours a month at A$100 an hour:

2 × 12 × A$100 = A$2,400 a year

Administration may include updates, access management, monitoring, troubleshooting, model changes, backup checks and documentation.

Component	Annual amount
Hardware allocation	A$1,000.00
Incremental electricity	A$65.70
Administration	A$2,400.00
Illustrative subtotal	A$3,465.70

The assumptions are hypothetical.

3. Complete the local worksheet

Local cost	Assumption	Annual result	Evidence
Hardware allocation
Operating and idle power
Cooling or facilities
Administration
Security and access
Backup and recovery
Repairs and replacement
Software or support
Migration and model changes
Human review and correction
Local annual total

Do not treat existing hardware as automatically free if the workload consumes capacity, brings replacement forward or prevents another use. Conversely, allocate only the relevant share when the machine genuinely supports other work.

4. Complete the hosted worksheet

Record subscription allocation and/or measured API usage, limits and additional charges. Record the controls and terms for the exact hosted candidate and access arrangement you are comparing.

Hosted cost	Monthly result	Annual result	Evidence
Subscription allocation
API usage or additional subscription charges
Integration and administration
Security and access
Human review and correction
Retries or rejected outputs
Hosted annual total

If the service separately charges for input, output, cache, reasoning or other units, use measured billing records rather than a headline rate. If usage is included in a subscription, the subscription still has a cost and may have relevant limits.

Apply comparable labour accounting: include setup, administration, review and correction for both candidates, but do not double-count the same staff activity.

5. Test sensitive assumptions

In the illustrative local scenario:

• Doubling incremental power from 150 W to 300 W adds A$65.70 a year, with operating hours and electricity price unchanged.
• Adding one administration hour a month at A$100 an hour adds A$1,200 a year.

This does not prove labour always dominates. It shows why administration assumptions need as much scrutiny as electricity estimates.

Sensitivity	Low	Expected	High
Workload volume
Electricity use
Administration hours
Hardware life and repair
Hosted paid usage
Human correction time

Record omissions

The A$3,465.70 subtotal includes only the stated hardware allocation, incremental operating electricity and administration allowance. Specify which activities that allowance covers. Assess additional costs for idle power, cooling, networking, security, backup, repairs, software or support, human review and correction, setup or integration, migration and growth only to the extent they are not already included. Financing, tax and residual value are not modelled. Capability and quality also need evaluation.

Record material omissions and estimate them consistently for both options.

Decision record

Choose one:

• Local: measured ownership cost and accepted outputs justify it.
• Hosted: capability or lower operating burden justifies the measured cost.
• Hybrid: explicit routing is justified, with each path costed separately.
• More evidence: usage, quality or labour is not yet comparable.
• Stop: no option meets the acceptance and risk standard.

Do not estimate break-even by dividing hardware cost by a guessed token price. A defensible comparison requires representative usage, comparable staff time and the same acceptance standard.

Carry this worksheet’s costs, omissions and sensitivity results back to Running AI locally for the workload decision. For the accepted-output denominator and workload-level unit-cost calculation, use the separate guide What does an accepted AI result cost?; this worksheet supplies ownership and hosted-cost inputs rather than replacing that method. Organisation-level benefits and attribution require a separate assessment; this cost comparison alone establishes no ROI.

Source note

This worksheet uses hypothetical inputs and illustrative arithmetic. It does not report measured electricity use, staff effort, subscription pricing, provider usage or hardware performance.