> I don’t think companies will do that. Why don’t they just buy local on-premise infrastructure even though it’s cheaper than AWS?

For customer facing, production software, its worth paying a cloud tax to get the reliability guarantee. For tools that are used by engineers for code development, there is no need for such bulletproof guarantees.

That makes very little sense. SaaS/cloud tooling is overwhelmingly popular for internal tooling.

Which category of developer tool has on-premise as the more popular option?

Cloud isn’t about “reliability,” it’s about being able to focus on your core business rather than spending all your time maintaining stuff.