Unlike previous version, where source control and automated build process was left optional for vendors and customers, Dynamics 365 for Finance and Operations, Enterprise edition standardize the development application life cycle by providing the build automation out the the box using VSTS. No matter you using cloud VM's or downloaded VM's on premise for development, you can use build machine in the cloud build VM to automate the build and deployment process. 

When a Build VM is deployed in Developer topology through LCS, it is pre-configured and ready to start a build. You can change the default configuration at any time from the Visual Studio IDE or the VSTS interface. The build machine is also auto-configured with default settings for build agent, build controller, build process template, and build definition. Tests that are integrated with build definition are executed after the build is successful. Technically, you can turn you downloaded on-premise VM as build machine but you have to do all these setup manually.

The following screenshot shows, build definition and configuration deployed on the VSTS account when you deploy the build machine:

As shown in the screenshot, default build definition contains all the standard steps which you need to build solution including generating deployable packages. You can use this standard build definition to create build right away or customize it as per your specific needs. Automated build definition can also discover and execute all unit test and automated UI tested if you have. 

If you are customer and using ISV solution for your implementation project, your ISV will provide their solution model. You can simply add their source code in VSTS source control and build process will pickup those models and build the final deployable package.