RE: What Azure subscription should I purchase for Development and testing? (On-Premises)
It is up to you how you do it. The VMs could be hosted on your own hardware if you want, but a decent server from an enterprise-grade manufacturer costs somewhere between 25 to 45.000 GBP depending on the CPU/RAM/Disk setup each, capable of hosting 10-20 VMs.
You could do a costing depending on the selected hardware during the deployment of an Azure-based workstation on the LCS site depending on using a shared or dedicated development environment.
Also for on-prem factor in the other IT- and maintenance-related costs.
That would be a good comparison starting point to see if financially you are better off running it in the cloud or in-house.