Choosing Ollama over a cloud LLM API means conversation data never transits a third-party network. For a platform handling sensitive business conversations — sales negotiations, legal matters, HR discussions — this is a significant data protection advantage. But local inference is not a privacy guarantee by itself.
Key Analysis
Local inference eliminates the data processing agreement requirement for the LLM provider — conversation data stays entirely within your infrastructure.
GDPR data residency requirements are satisfied by default when using Ollama on on-premises hardware.
Local inference does not address data-at-rest encryption, access logging, or the security of the server itself — these remain your responsibility.
Risk Signals
Assuming local inference resolves all data protection obligations — it removes one processor but adds self-hosting obligations.
No encryption at rest for conversation data stored in the same database as the locally-run model.
Audit logs that record LLM inference calls without recording which data was processed.
Action Items
Document Ollama as a technical component under your GDPR Article 30 Records of Processing Activities — it processes personal data in conversation text.
Encrypt conversation databases at rest with a separate key from application secrets.
Log all LLM inference calls with correlation IDs for audit trail purposes.