If you plan to run Team Foundation Server in a workgroup environment using local user accounts, you may want to read this post on the Team System User Education blog (my team).
Managing Team Foundation Server in a workgroup environment is possible but can present some challenges. Active Directory environments are recommended for most Team Foundation Server deployments. If Team Foundation Server is to be deployed in a workgroup, it should only be deployed in workgroups with a very limited number of users and computers.
Visual Studio Team System User Education : Managing Team Foundation Server in a Workgroup.