Variables provide an easy way to avoid hard-coding all sorts of things in your system, environment or project. Here is some best practices advice on the subject:
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Put environment specific settings in an environment (Duh!) configuration file. Create an environment for this.
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When referencing file locations, prefer
${PROJECT_HOME}over expressions like${Internal.Entry.Current.Directory}or${Internal.Pipeline.Filename.Directory} -
Configure transform copies with variables to allow for easy transition between differently sized environments.