- Always, always develop on a local setup.
- Always use source control.
- Always put everything under source control, including the database schema.
There seems to be a lot people who like to have one central server that everyone uses for development -- I don't really understand why you would prefer to be in a shared environment where people making changes can interrupt your development process.
In my shop everyone has their own development web server and their own development database (often colocated on the same database server, but their own database). That way they're completely insulated from the other developers and can't interrupt each other.
When they implement a feature or fix a bug they check in their code and the matching database schema so that it's available to other developers as a complete unit. Releases to the test server or the deployment server are done from a labelled version in the source code repository.
Stable and sane! I don't see why you'd do it any other way when the development servers are free!
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