Set Up Your Development System 
Questions Answered
What kind of infrastructure is appropriate for my development?
How does the Developer Studio support the central development infrastructure?
Does the Developer Studio also support the also an individual development?
What if I started developing locally, can I migrate my local components into the central infrastructure later on?
Introduction
Developer Studio and SAP NetWeaver Development Infrastrucure (NWDI) Integration
The Developer Studio provides full support when developing large-scale Java projects for standard technologies (J2EE, Java EE, Web services, etc.) and for SAP technologies (Web Dynpro, Java Dictionary, Composite Applications, etc.). The special feature of the SAP NetWeaver Developer Studio is that - in addition to providing toolsets for different Java development requirements - it is integrated consistently into a robust SAP development infrastructure. The combination of both aspects makes the Developer Studio a highly productive and comprehensive development environment that spans the whole development cycle of Java projects, including integration of a source management system, plus configuration and transport management.
SAP Component Model
In addition to the central infrastructure services (version control, central build, transport services), the SAP component model is a central part of the NWDI. This is based on the concept of the software and development components and is used to structure the software on the basis of individual components that define clear use relationships between each other and therefore form a prerequisite for modularization and reuse. However, developers work with projects in the Developer Studio as before. In other words, a development component is identified with a project in the Developer Studio and is also used to group development objects as suited to a certain type of project.
More information: SAP's Component Model
Development Process
Depending on whether or not, and to what extent, the NWDI is used during the development process, we can derive various use scenarios:
Developing in a team using the full NWDI
Developing locally with the SAP Component Model
Developing locally without SAP Component Model - not applicable for composite applications!
Activities
Selecting Your Development Infrastructure
Development of composite applications is tightly coupled to the SAP Component Model and the SAP Component Model itself is coupled to with the NWDI. The first decision to be made is if you want to work locally or in a team environment using the full NWDI. The local development process gives you a quick start into component based development and you can extend you development environment any time.
More information: Local Development as a Start to Component Based Development
Once you have decided which development infrastructure you use, refer to the Prerequisites section that provides you with information about the features, capabilities and prerequisites that are required for this use case.
Setting Up the Development System for Local Development
To get local development going you need to perform the following steps:
Start the Developer Studio.
Choose
Window 
Open Perspective Other... Development Infrastructure 
.Choose Local Development.
From the context menu of Local Development choose
New Development Configuration Create from Scratch .Provide the parameters for your development configuration.
Optional: Distribute Development Configuration to team members using file sharing. Local development does not provide version and source control but you can share your development components with other developers.
Setting Up the Development System for Team Development
The NWDI provides a wizard that guides you though the different steps of setting up the development configuration.
More information: Wizard Based Configuration of DI (server), First Steps in Development Infrastructure (Developer Studio)