Hi Todd,
This is one of the most common questions that I field from users who user/are looking to use an InCopy workflow. It’s also often one of the biggest hurdles due to IT policies etc. To quickly answer your question… Yes, the InCopy workflow at this point in time, works best with a local server that all users have access to. This facilitates working in either a linear or collaborative workflow, and it’s simply the most reliable solution in my opinion.
I’ve worked with companies who have been able to get InCopy to work with DropBox, GoogleDrive, OneDrive, etc. but in my testing, I’ve seen issues with latency where edits get lost with this type of workflow. Again, I’ve seen users use this method and get it to work, but there are variables to consider and I just don’t like implementing workflows that leave things to chance.
Another fantastic solution to the server problem, is TruEdit make by MEI. TruEdit takes care of the server for you and provides a means to use InCopy and InDesign from virtually anywhere. Something to consider if the server is a challenge for your company and especially if you have any remote users.
I hope this helps Todd. Please let me know of you have any other questions.