The split that defines it
BYOC divides a system into two planes. The control plane — session orchestration, policy evaluation, trace collection — runs on the vendor's infrastructure and holds no customer data at rest. The execution plane runs inside the customer's cloud account, under the customer's identity management, network policy, and egress rules, and is the only component that ever connects to customer systems.
The practical consequence is that "where is our data processed?" becomes answerable with a network diagram rather than a contractual assurance.
BYOC compared with the alternatives
Vendor-hosted SaaS processes your data on the vendor's infrastructure. Fastest to deploy, lowest operational burden, and the correct answer whenever no written commitment restricts where the data may go.
BYOC keeps processing inside your perimeter while the vendor still operates the orchestration layer. You take on infrastructure responsibility in exchange for a residency answer that survives review.
Fully on-premises runs both planes in your environment, for air-gapped networks and environments where outbound connectivity is prohibited rather than merely restricted.
What decides it
Not sensitivity — everyone rates their data sensitive. Ask whether a written commitment to a regulator or a customer constrains where this data may be processed. If yes, the topology is already chosen. If no, you are optimising operational cost and hosted is usually right.
What BYOC does not automatically give you
Choosing BYOC settles where code runs. It says nothing about how safely it runs there. An agent that writes and executes code is a remote execution path you built deliberately, and container-level isolation is not sufficient for that workload — containers share a kernel.
The properties worth confirming separately are hardware-level sandbox isolation for generated code, egress denied by default from that sandbox, and an approval gate on write actions. BYOC without those is a system that cannot leak to the vendor but can still misbehave inside your own network.