I see two reasons to do this in a production system.
- The server needs to use something like the WatchService to see if anything has changed. While that might not be a huge overhead it is overhead nonetheless.
- From a security perspective you need to be able to somehow transfer a war type file to the server. This requires an O/S login that has permission to write to directories "owned" by the server. That might mean that a user could maliciously or accidentally write to a configuration or other file that could affect the server.
On the other hand, if you are using the API to do this there is a different security aspect that is now controlled by Wildfly. That takes configuration changes and management too.
I've seen this done both ways. In a small environment with the server is locked down for just a few people it usually isn't a problem either way (though, again, the I/O hit could be decent). But in a large environment with many applications potentially on the same instance the security aspect usually wins out.