Best of Both Worlds: Fine-Tuned Small Models Complement LLMs for Cost and Performance Benefits

Should you replace your text-embedding pipeline with a large language model? We answer this with a controlled, cost-aware comparison of ten LLMs across six families and 26 embedding models (118M to 14B parameters) on 37 tasks spanning classification, semantic textual similarity (STS), clustering, pair classification, and retrieval. In aggregate the two paradigms are effectively tied: the best LLM (Gemini 3.1 Pro, 77.6) and the best embedding model (77.2) differ by 0.4 points. Their strengths differ by task: LLMs lead on reasoning-heavy retrieval, embedding models lead on classification, and the two match on clustering, STS, and pair classification. Reaching that parity is expensive. An LLM costs up to 1,431x more than an embedding model of comparable quality (USD 154 vs. USD 0.11 per benchmark pass), and the open LLMs tested process tokens 2.5 to 736x more slowly on the same GPU. Reasoning tokens account for 28 to 81% of LLM inference cost; lower reasoning budgets preserve or improve retrieval quality for most models in our ablation. The Pareto frontier contains the leading embedding models and one LLM, Gemini 3.1 Pro. These results support a division of labour: use embedding models for similarity, classification, and clustering, and reserve LLMs for reasoning-intensive retrieval. Our code, datasets, and results are publicly available at https://github.com/embeddings-benchmark/embedders-dilemma.

Businesses increasingly rely on large language models (LLMs) to automate simple repetitive tasks instead of developing custom machine learning models. LLMs require few, if any, training examples and can be utilized by users without expertise in model development. However, this comes at the cost of substantially higher resource and energy consumption compared to smaller models, which often achieve similar predictive performance for simple tasks. In this paper, we present our vision for just-in-time model replacement (JITR), where, upon identifying a recurring task in calls to an LLM, the model is replaced transparently with a cheaper alternative that performs well for this specific task. JITR retains the ease of use and low development effort of LLMs, while saving significant cost and energy. We discuss the main challenges in realizing our vision regarding the identification of recurring tasks and the creation of a custom model. Specifically, we argue that model search and transfer learning will play a crucial role in JITR to efficiently identify and fine-tune models for a recurring task. Using our JITR prototype Poodle, we reduce inference time by up to 7.5x compared to a self- hosted LLM and save more than $2,200 per 1M requests compared to a flagship hosted LLM, while achieving accuracy competitive with the LLM baseline.

Eliciting explicit, step-by-step reasoning traces from large language models (LLMs) has emerged as a dominant paradigm for enhancing model capabilities. Although such reasoning strategies were originally designed for problems requiring explicit multi-step reasoning, they have increasingly been applied to a broad range of NLP tasks. This expansion implicitly assumes that deliberative reasoning uniformly benefits heterogeneous tasks. However, whether such reasoning mechanisms truly benefit classification tasks remains largely underexplored, especially considering their substantial token and time costs. To fill this gap, we introduce TextReasoningBench, a systematic benchmark designed to evaluate the effectiveness and efficiency of reasoning strategies for text classification with LLMs. We compare seven reasoning strategies, namely IO, CoT, SC-CoT, ToT, GoT, BoC, and long-CoT across ten LLMs on five text classification datasets. Beyond traditional metrics such as accuracy and macro-F1, we introduce two cost-aware evaluation metrics that quantify the performance gain per reasoning token and the efficiency of performance improvement relative to token cost growth. Experimental results reveal three notable findings: (1) Reasoning does not universally improve classification performance: while moderate strategies such as CoT and SC-CoT yield consistent but limited gains (typically +1% to +3% on big models), more complex methods (e.g., ToT and GoT) often fail to outperform simpler baselines and can even degrade performance, especially on small models; (2) Reasoning is often inefficient: many reasoning strategies increase token consumption by 10$\times$ to 100$\times$ (e.g., SC-CoT and ToT) while providing only marginal performance improvements.