As you all know, you can either install Team Foundation Server (TFS) on promise, or use the cloud-hosted service called Visual Studio Online (VSO). They both offer very similar, but not exactly identical capabilities. Some features of TFS are not supported by VSO; on the other hand, VSO gets new features more rapidly than TFS and it also have a few unique abilities.

One major advantage or TFS over VSO is the ability to modify process templates – adding new fields, hiding unused ones, creating work item types, modifying states and workflows and so on. VSO came with some features to mitigate this limitation (such as you can use tags as a replacement of custom fields), but many teams really need customized process templates.

But that’s going to change. I’m sure it’s taken major engineering effort, but finally Visual Studio Online is going to offer many of the process customizations you may hunger for: new fields, new work item types, you name it. It also comes with some features, such as inheritance of process templates (customized templates will inherit changes in the original template).

If you want more details, the following blog post may be the best starting point: MSDN ALM blog: Visual Studio Online Process Customization – Update.

I think it’s a really major step for adoption of VSO. There are still less and less things that you can do in TFS and not in VSO.