Depending on service you are using data might be store in Microsoft Servers. What data are you referring to? You could manage it in on-premises method and keep your data locally but for some data and not all.
Sorry to give vague answers. The defender solution will be entirely cloud based. we will have local servers (when they become end of life we replace them with a cloud based service). In the meantime we need a solution where our data is not uploaded to Microsoft. We have identifiable medical data and are subject to legislative requirements