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How do we create a DEVELOPMENT, UAT & PRODUCTION environment in SharePoint Online 365?

what is the best practice?

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    you can have a separate site collection for it in same tenant Commented Mar 9, 2022 at 12:02

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The best practice is to use a developer tenant. You can request one for free and have it in 5 minutes (and can even provision test users/data) using the O365 Developer Program: https://developer.microsoft.com/en-us/microsoft-365/dev-program

The practical answer, however, depends on what you're building. If you are building some list formats or customizing some sites, then just add some temporary site collections and do your work there. If you're doing SPFx development, you could potentially go this route as well - just be sure to use a Site Collection app catalog (you'll have to request this from your admins).

Doing your development in your production tenant has a lot of benefits (access to the data you need, access to anything else deployed, etc.) but it is not without both risk and limitations. Often you won't be able to approve API permissions, enable CDNs, provision app catalogs, or other admin tasks. You can do all of that in a dev tenant (and even take screenshots to include your email to your admins asking them to do the same). If you break something in a dev tenant you can throw it away and get a new one. Not so much in production.

So... go ahead and get a dev tenant. This is where you should do most things. You can have your own or share one as a team. Setup a profile for your production tenant and one for your dev in your browser (Chrome, Edge, Firefox) to avoid sign-in hell. But, know there are times where just doing things in an unshared site collection in your production tenant can make sense - just use your best judgement.

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    I'd like to add to Chris' answer. You may need to do a little planning around licenses depending on what services you plan on using. The developer tenant gets you 25 free E3 licenses, which covers a lot, but doesn't cover everything. For example, E3 doesn't cover Azure services, it doesn't cover some of the Microsoft Viva services, and it doesn't cover Power Platform premium features. Commented Mar 9, 2022 at 22:56

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