Should SLMs be in the Driver's Seat? A Study of Local Models as Interpreters in Cloud-Written Agent Programs

Small language models (SLMs) are attractive as local agent controllers because they reduce remote inference, latency, and deployment footprint, yet structured tool errors can cause an agent step to fail. Existing routers typically select a model once per query. However, agents expose sequential decision points whose difficulty dynamically changes based on intermediate observations. We propose STEPGATE, an uncertainty-aware handoff framework that scores each local SLM action and selectively escalates challenging steps to a stronger model. On a 52-task held-out single-step BFCL-derived test split, the Qwen2.5-1.5B/7B pair attains 82.7% task success with 30.8% escalation, versus 67.3% local-only and 75.4% random escalation (which uses 33.8% escalation). In a separate multi-turn evaluation, STEPGATE achieves 69.0% trajectory success and 84.0% action success using only 30.0% cloud actions, compared with 48.0%/70.5% local-only, 60.0%/78.2% random escalation, and 57.0%/77.1% query-level routing (strong-only achieves 82.0% trajectory success at 100% cloud actions). These results suggest that step-level escalation recovers a large share of the performance gap to the stronger Qwen2.5-7B backend at a matched cloud-action rate while transmitting fewer tokens remotely. However, our evaluation is limited to one model family, a single stronger backend, and scripted tasks. Furthermore, the test sets are small, multi-turn comparisons rely on paired intervals and statistical tests, and our risk tiers serve as research annotations rather than formal safety guarantees.

Small language models (SLMs) offer a promising foundation for on-device agents through low-latency, resource-efficient inference, yet limited reasoning and planning capabilities constrain their performance on long-horizon tasks requiring multi-step interaction with the environment. Step-level collaboration between SLMs and larger cloud-hosted models can bridge this gap, but identifying states that warrant cloud assistance remains challenging: the contribution of each cloud call is entangled with subsequent actions and can be assessed only from the final task outcome. Compounding this challenge, the SLM must balance two competing objectives: maximizing task success and minimizing cloud calls. To address this, we propose Sibyl, an algorithm that trains SLM agents to selectively consult cloud models at the step level and internalize their guidance for subsequent decisions, achieving strong task performance with minimal cloud reliance. Sibyl follows a three-stage training pipeline that (1) builds a robust base policy through consultation-free self-evolving reinforcement learning (RL); (2) cold-starts consultation behavior via decisive-disagreement state mining; and (3) jointly optimizes consultation decisions and guidance internalization through consultation-aware RL. Experiments on ALFWorld and WebShop demonstrate that Sibyl, using only a 0.6B-parameter model, outperforms state-of-the-art baselines, including agent training and routing methods, by 95.2% and 80.4% in success rate while averaging only 0.8 and 3.9 cloud calls per trajectory, respectively.

Complex and long-horizon agent tasks often rely on frontier models deployed in the cloud to achieve strong performance. However, using these models for every step of a long-horizon trajectory incurs substantial inference cost, even though not all steps may require the same level of model capability. In this paper, we find that allocating the LLM to only a small subset of key steps can achieve performance comparable to full LLM execution while significantly reducing inference cost. Motivated by this observation, we propose EdgeWise, an edge-cloud collaboration framework that deploys an SLM on the local device as the primary solver and selectively delegates critical steps to a cloud LLM when stronger model capacity is needed. To enable autonomous delegation without additional models at inference time, we introduce a step-level RL method that jointly optimizes task solving and delegation, with fine-grained credit assignment for individual delegation decisions. We also introduce an external judge-based delegation strategy and use it to systematically investigate key design choices in edge-cloud collaboration, including when to delegate, how delegation decisions should be made, what context should be shared, and how frequently the cloud LLM should be invoked. Experiments show that EdgeWise matches or outperforms pure-LLM execution while reducing inference cost up to 62% on SWE-Rebench and 34% on Terminal-Bench 2.1. We further deploy EdgeWise on a local workstation, demonstrating comparable cost savings in a practical edge-cloud setting.