In Dynamics 365 for Finance and Operations, development is done on preconfigured one-box VMs. These VMs have Visual Studio, Dynamics, and SQL Server preinstalled and are integrated to ease development. 

For development, you will need one development machine for each developer. Depending on the scope and complexity of your project and the number of developers working on it, you may need multiple development VMs. Along with machines for developers, you will need one build machine to build a solution and create deployable packages. Build machines can also execute best practice checks, unit tests, and automated regression tests as part of the build process.

The following diagram shows a typical development topology:

As shown in the preceding diagram, multiple developer VMs can be used by a developer to synchronize the source code, create/update code, create automated test cases, and check in the code. A build VM is used to compile source code, execute automated test cases, and create deployable packages. Cloud-based Azure DevOps links developer VMs for source control and builds automation functions.

There are two options for deploying VMs: cloud VMs and on-premises VMs, both of which are available via a downloadable VHD. Depending on your situation, you can use a combination of on-premises VMs and cloud VMs for development.

Here, we will point out some obvious scenarios of when to use on-premises and cloud:

• On-premises dev VMs are cost-effective if you already have the hardware, IT infrastructure, and Windows Server licenses to support it.
• Use cloud VMs to scale out when projects require additional resources for a limited period of time. It is more cost-effective than planning for worst-case capacity on-premises.
• Connect all VMs (on-premises and cloud VMs) to Azure DevOps for version control.