Processes in Microsoft 365 for setting up Office apps, redeeming product keys, and activating licenses.
New computers may include a trial version of Microsoft 365, sometimes in multiple language versions, each of which has its own entry in the list of Installed Apps in Windows Settings. Add to that the dashboard app, nowadays confusingly named Microsoft 365 Copilot.
The version you purchased may not be any of these preinstalled (trial) licenses, which is why an uninstall followed by an install is often required. (Sometimes, just signing in with the correct account will work to get the correct product and license.)
With a license to install the full Microsoft Office suite, the apps are not cloud-based. However, saving to the OneDrive cloud is usually the default (but you can change that if you prefer to save locally).
Note that contributors in this user-to-user forum usually won't be able to answer why questions. Only Microsoft can explain why they do what they do. You can send feedback directly to the developers and decision makers via the portal at https://feedbackportal.microsoft.com/feedback.