Inference in Local/On-Prem DCs


Many enterprises choose to run AI inference workloads inside their own local or on-premises data centers. This approach offers tighter control over data security, sovereignty, compliance, and cost predictability. Unlike hyperscale inference, which serves global APIs, on-prem inference is tailored to enterprise-specific datasets and business processes. Industries such as finance, healthcare, and government rely heavily on local inference for mission-critical applications.


Overview

  • Purpose: Enable organizations to run inference workloads privately, often for compliance or cost reasons.
  • Scale: Ranges from small server clusters to 10–20 MW enterprise AI halls.
  • Characteristics: Controlled environments, enterprise integration, often hybrid (connected to cloud APIs).
  • Comparison: Unlike hyperscale inference, on-prem inference prioritizes privacy and integration with enterprise IT over elastic global scaling.

Common Use Cases

  • Healthcare: Medical imaging analysis, EHR data inference, HIPAA-compliant LLMs.
  • Finance: Trading models, risk scoring, fraud detection inside sovereign DCs.
  • Government: Classified inference on air-gapped systems.
  • Manufacturing: Predictive maintenance and quality control in smart factories.
  • Legal & Compliance: Document review, contract analysis, private AI copilots.

Bill of Materials (BOM)

Domain Examples Role
Compute NVIDIA A100/H100, AMD MI300, Intel Gaudi, on-prem GPU clusters Accelerators sized to enterprise-scale inference
Networking Enterprise LANs, InfiniBand for GPU clusters Interconnect inference servers and enterprise IT
Storage Enterprise SAN/NAS, NVMe storage arrays Hold model weights and enterprise datasets
Frameworks ONNX Runtime, Triton, Hugging Face Optimum Enable optimized inference inside private DCs
Orchestration VMware, Kubernetes, OpenShift Integrate inference workloads with enterprise IT ops
Security HSMs, zero-trust, sovereign key mgmt Protect sensitive enterprise and regulated data

Facility Alignment

Deployment Best-Fit Facilities Also Runs In Notes
Healthcare AI Enterprise DCs Hyperscale (via hybrid) HIPAA requires local control for PHI
Financial Models Enterprise DCs, Colo Hybrid IT Low-latency risk and fraud inference
Government / Classified Air-gapped Gov DCs None Runs entirely inside sovereign networks
Industrial IoT Enterprise DCs Edge DCs Factories running inference close to OT systems
Legal & Compliance Enterprise DCs Hybrid IT Contract review and GRC AI copilots

Key Challenges

  • CapEx: GPUs and accelerators are expensive to deploy at scale.
  • Utilization: Enterprises may underutilize GPU clusters compared to hyperscalers.
  • Expertise: Running AI inference stacks requires specialized skills.
  • Compliance: Local workloads must align with sector regulations (HIPAA, SOX, GDPR).
  • Hybrid Complexity: Balancing on-prem inference with cloud APIs for overflow or specialty models.
  • Energy & Cooling: Enterprise DCs must retrofit to handle GPU rack densities.

Notable Deployments

Deployment Operator Scale Notes
JP Morgan AI Risk Models JP Morgan Enterprise DCs On-prem inference for credit/risk scoring
Epic EHR AI Assist Epic Systems + Hospitals Enterprise DCs Inference on patient data under HIPAA
DoD AI Pilots US Department of Defense Air-gapped Inference in classified government facilities
Siemens Factory AI Siemens Enterprise / Industrial DCs Predictive maintenance and quality control
Legal AI Copilots AmLaw 100 firms Enterprise DCs Private inference for contracts and discovery

Future Outlook

  • Hybrid AI: On-prem inference augmented by hyperscale overflow via secure APIs.
  • Sovereign AI: Growth of private LLMs deployed in sovereign clouds or local DCs.
  • ASIC Adoption: Enterprises adopting inference-specific ASICs (Groq, Tenstorrent, etc.) for efficiency.
  • Digital Twins: Enterprises integrating inference into simulations and IoT twins.
  • Sustainability: Push for efficient GPU cooling and carbon-aware inference scheduling.

FAQ

  • Why run inference on-prem? For data security, compliance, sovereignty, and cost predictability.
  • Which industries use on-prem inference most? Healthcare, finance, government, manufacturing, legal.
  • How big are on-prem inference clusters? From small GPU racks to tens of MW for large enterprises.
  • Is on-prem inference cheaper? Often yes for steady workloads; cloud remains better for bursty demand.
  • What’s next? Enterprise adoption of sovereign AI stacks and hybrid inference architectures.