Does Archive Manager have to be Installed on the same Server as Exchange?
There is no good reason to install ArchiveManager on the same server Exchange resides. Even if they are installed on the same box, Archive Manager uses remote calls (i.e. network calls) to work with an Exchange server.
There are potential drawbacks for it. It can affect further scalability both Exchange server and Archive Manager as they are resource intensive applications. Also it can decrease the total system high availability. For example Exchange server goes down for some reason, the users can still have an access to their emails, if Archive Manager is installed on a different system. If everything is on one box then users have no access to their emails after the system crashed.