Microsoft Dynamics 365 is wholly committed to the cloud and the advantages it offers. Not only does operate on cloud-based architecture help with real-time tracking of changes in data, but it is also an excellent way to bring more control and standardisation to the system since all inputs and generated outputs will be stored in the same place.
Although if you do want to keep all your data on site, you can opt for Dynamics 365 Enterprise Edition which deploys infrastructure and computing power on site so you can feel more secure. Although this means that Dynamics 365 will be running on its independent cloud unique to your organisations, you do not loose connectivity over the internet.