We are having compilations problems in a TFS server and it's because the server lacks several libraries built in the default VS2012 Premium installation (Microsoft Fakes in this case).
I'm unsure of going ahead installing a full instance of VS, but first I want to know what is the best practice in this regard?
What is recommended?
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I don't see any issue installing VS on the TFS server(I assume you run your builds on that server too and that's when you are seeing the problem. Ideally tfs server and build box should be separate but some people use the same box.) I have used Visual Studio on the build box several times to debug issues with builds. You just need to make sure you close the VS instance (if it has a solution open) once you are done with debugging otherwise your builds can fail when they try to clean up the project directory at the start of the build.
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Since we are talking a sandbox, do whatever and don't worry about it. If we are talking best practices, it's not a good idea to put your build tier on the app tier / data tier. Any developer could check in code that gets run on the server during the compile and trash your entire environment.
Have you looked at Visual Studio Online? It's a hosted TFS service and you can use their hosted build controller or configure your own. That makes for a very good sandbox IMO.
We run a single server TFS instance which has everything - sql, SharePoint and tfs - running on it. It is also a build server so it has to have VS 2010 and 2012 installed. We've done this with all versions since 2005 and have had no issues with it at all.