AI is rewriting the rules of enterprise software. The first wave of SaaS moved data into vendor-controlled clouds. The new wave moves software and models to the data, inside the customer’s infrastructure. Training a state-of-the-art large language model requires data volumes that would have been unimaginable during the SaaS era. IDC’s 2024 AI Infrastructure Survey found that 78% of large enterprises now avoid sending proprietary datasets to third-party AI providers due to security, compliance, and intellectual property concerns. The data gravity of modern AI has made centralized architectures economically and politically untenable. 78% of large enterprises now avoid sending proprietary datasets AI’s data gravity and compliance demands have created a new operating model. Vendors bring software to the customer. Enterprises require AI systems that can run within their virtual private clouds (VPCs), neoclouds, sovereign clouds, or datacenters. In this model, the customer retains full ownership of data, ML pipelines, and security policy. This blog post examines the regulatory, economic, and architectural forces behind this shift and explains why customer-controlled architectures define the future of enterprise AI. Why AI Breaks the Traditional SaaS Model Traditional SaaS centralized compute and storage in multi-tenant vendor environments. That worked well when data volumes were small and latency requirements were lax. AI changed both. Training and fine-tuning an LLM requires petabyte-scale, proprietary datasets that enterprises treat as competitive assets. Moving them into vendor clouds is slow, costly, and likely noncompliant. At 10 Gbps sustained throughput, transferring 1 PB of data requires more than nine days and costs hundreds of thousands of dollars in egress fees. A centralized inference pipeline that crosses regions typically incurs 30–60% higher latency than compute co-located with the data source. 30–60% higher latency than compute co-located with the data source Compute-to-data architectures reverse the flow to minimize latency, reduce cost, and ensure security and compliance. Let’s take a look at how this translates into deployment architectures. The Rise of Cloud-Prem and Private AI In cloud-prem deployments, vendor software runs inside customer-controlled environments such as VPCs or datacenters. Private AI extends this concept to machine learning, allowing fine-tuning and inference to occur entirely within customer boundaries. Sovereign cloud implementations ensure compliance with jurisdictional laws such as GDPR and India’s DPDP Act. These architectures blend cloud efficiency with on-prem control, keeping AI close to data sources and under enterprise governance. Gartner projects that by 2029, over 50% of multinational organizations will have digital sovereign strategies, up from less than 10% today. The European Union, Japan, and India have launched “Sovereign AI” initiatives to ensure public-sector AI workloads stay within national borders. Drivers of the Shift A number of trends and requirements have converged to create and propel this shift. Regulatory Compliance and Data Sovereignty Governments have escalated from data protection to enforcing data localization. GDPR, HIPAA, DORA, and the DPDP Act codify strict rules on where data resides and who can access it. Violations are expensive. Under GDPR, fines can reach €20 million or 4% of global annual revenue, whichever is higher. In a recent Accenture survey, 84% of respondents said that EU regulations have had a moderate to large impact on their data handling, with 50% of CXOs stating that data sovereignty is a top issue when selecting cloud vendors.. The architectural consequence is profound: vendor software must live where the data lives. vendor software must live where the data lives. The Economic Efficiency of Moving Compute to Data Compute-to-data architectures cut AI operational costs by 20–35% on average, according to Deloitte’s 2024 AI Infrastructure Cost Study. They reduce egress fees, eliminate redundant storage, simplify compliance overhead while enabling 40% faster model iteration. These savings elevate data proximity into a competitive advantage. Security, Trust, and Data Control Data is an enterprise’s intellectual property. A company’s proprietary datasets, customer histories, designs, research, or trade strategies, are assets that cannot be exposed. IBM reported in the 2023 Cost of a Data Breach Report that the global average cost of a breach is $4.45 million, with the number rising above $10 million in regulated industries such as healthcare and finance. PwC’s 2024 Enterprise AI Survey revealed that 68% of enterprises cite “lack of control over AI data flow” as their top barrier to wider adoption. Cloud-prem and Private AI deployments establish trust-by-design, where vendor systems operate within enterprise boundaries, using encryption and access control enforced by the customer. 68% of enterprises AI Workload Portability AI workloads consume vast amounts of resources, such as CPU, GPU, storage, memory, and networking. Pricing can vary 5x across clouds, depending on instance type, region, and availability. Enterprises require portable, containerized, API-managed workloads where cost, performance, and compliance align. Flexera’s 2024 State of the Cloud Report found that 61% of enterprises rank cross-cloud portability among their top three purchasing criteria. 61% of enterprises rank cross-cloud portability among their top three purchasing criteria Requirements for Enterprise AI Software Enterprise AI software must deploy anywhere, run compute where data lives, and separate control from data planes. It must also minimize egress and use containerized, modular components orchestrated through common IaC frameworks like Terraform or Pulumi. The Cloud Native Computing Foundation (CNCF) reports that over 90% of enterprise ML workloads now run on Kubernetes. Terraform, Pulumi, and OpenTofu usage for AI infrastructure management has grown threefold since 2021, a sign that the industry is rapidly standardizing around portable, declarative architectures. This model redefines the vendor-customer relationship. Vendors deliver models, algorithms, and orchestration frameworks. Enterprises govern the environment, enforce compliance, and protect data, allowing them to innovate without risk. redefines the vendor-customer relationship The New Reality: From Cloud-First to Customer-First The New Reality: From Cloud-First to Customer-First Cloud-first once meant agility. In the AI era, it often means risk. Compliance, economics, and trust have turned the model inside out. By 2030, Gartner projects that 70% of enterprise AI workloads will run in customer-controlled environments. Vendors that adapt to deliver portable, customer-controlled AI will define the next decade of enterprise software. Those that cling to centralized SaaS will fade into irrelevance. The lesson is simple:AI has made data control non-negotiable. The future belongs to architectures that let enterprises control data by their own rules.
