Cost & Latency Budgeting: Designing Agents That Are Economical

{
  "byte_id": "agentic_dev_015",
  "title": "Cost & Latency Budgeting: Designing Agents That Are Economical",
  "level": "foundation",
  "domain": [
    "agentic-development",
    "cost-control",
    "performance"
  ],
  "intent": "Understand how to design agents with predictable cost and latency, so they are usable at scale and acceptable for business.",
  "core_idea": {
    "one_liner": "An agent that is too slow or too expensive is broken, even if it is smart.",
    "why_it_matters": [
      "Agent loops multiply cost quickly.",
      "Latency kills user trust and adoption.",
      "Without budgets, agents silently become unsustainable."
    ]
  },
  "definition": {
    "cost_latency_budget": "Explicit limits on how much time and money an agent is allowed to spend per task."
  },
  "main_cost_drivers": [
    {
      "driver": "Model calls",
      "note": "Each reasoning or critic step adds cost."
    },
    {
      "driver": "Context size",
      "note": "Large prompts and long histories are expensive."
    },
    {
      "driver": "RAG retrieval",
      "note": "Embedding + search + reranking adds latency."
    },
    {
      "driver": "Tool calls",
      "note": "External APIs and retries increase both cost and time."
    }
  ],
  "budgeting_strategies": [
    {
      "strategy": "Step limits",
      "description": "Cap the number of reasoning loops or retries."
    },
    {
      "strategy": "Early exit",
      "description": "Stop when confidence is sufficient."
    },
    {
      "strategy": "Tiered models",
      "description": "Use cheaper models for simple steps, stronger ones for decisions."
    },
    {
      "strategy": "Caching",
      "description": "Reuse retrieval results and answers where safe."
    }
  ],
  "latency_targets": {
    "interactive_agent": "1–3 seconds perceived",
    "support_agent": "3–10 seconds acceptable",
    "batch_agent": "minutes acceptable"
  },
  "micro_example": {
    "scenario": "Ticket analysis agent",
    "bad_design": "Always runs full RAG + critic + reranking.",
    "good_design": {
      "step_1": "Try classification with cached rules",
      "step_2": "Use RAG only if confidence < 0.7",
      "step_3": "Run critic only for high-risk tickets"
    }
  },
  "failure_modes": [
    "Unlimited loops",
    "Always using the largest model",
    "No distinction between critical and trivial tasks",
    "Optimizing cost without measuring quality"
  ],
  "guards": [
    "Every agent must have explicit budgets.",
    "Budget overruns must be logged.",
    "Agent must degrade gracefully when budget is exhausted."
  ],
  "teach_it_in_english": {
    "simple_explanation": "Smart agents still need a budget.",
    "one_sentence_definition": "Cost and latency budgets keep agents usable in the real world."
  },
  "practical_checklist": [
    "Do we know the max cost per task?",
    "What happens when the budget is exceeded?",
    "Can we skip expensive steps safely?",
    "Are latency targets aligned with user expectations?"
  ],
  "tags": [
    "cost-control",
    "latency",
    "agent-design",
    "scalability"
  ],
  "meta": {
    "schema": "dkharlanau.dataset.byte",
    "schema_version": "1.1",
    "dataset": "agentic-bytes",
    "source_project": "cv-ai",
    "source_path": "agentic-bytes/agentic_dev_015.json",
    "generated_at_utc": "2026-02-03T14:33:32+00:00",
    "creator": {
      "name": "Dzmitryi Kharlanau",
      "role": "SAP Lead",
      "website": "https://dkharlanau.github.io",
      "linkedin": "https://www.linkedin.com/in/dkharlanau"
    },
    "attribution": {
      "attribution_required": true,
      "preferred_citation": "Dzmitryi Kharlanau (SAP Lead). Dataset bytes: https://dkharlanau.github.io"
    },
    "license": {
      "name": "",
      "spdx": "",
      "url": ""
    },
    "links": {
      "website": "https://dkharlanau.github.io",
      "linkedin": "https://www.linkedin.com/in/dkharlanau"
    },
    "contact": {
      "preferred": "linkedin",
      "linkedin": "https://www.linkedin.com/in/dkharlanau"
    },
    "canonical_url": "https://dkharlanau.github.io/datasets/agentic-bytes/agentic_dev_015.json",
    "created_at_utc": "2026-02-03T14:33:32+00:00",
    "updated_at_utc": "2026-02-03T15:29:02+00:00",
    "provenance": {
      "source_type": "chat_export_extraction",
      "note": "Extracted and curated by Dzmitryi Kharlanau; enriched for attribution and crawler indexing."
    },
    "entity_type": "agentic_byte",
    "entity_subtype": "level:foundation",
    "summary": "Understand how to design agents with predictable cost and latency, so they are usable at scale and acceptable for business."
  }
}