TL;DR: Open-source models are closing the gap with GPT-5-class frontier models—they already lead or match on retrieval, embeddings, and narrow tasks, but frontier models still win on the hardest reasoning and long-horizon agentic work. Self-hosting only pays off at high utilization; below that, a hosted API is cheaper. The smart move is routing by task: cheap open models for high-volume routine work, frontier tokens reserved for the 10% that actually needs them.
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