Microsoft stated that in order to run next-generation games, they must be installed on the console's internal drive or on a special Seagate external card. This is a significant disadvantage to players who are not using the Xbox Series X | S.
Modern Vintage Gamer has released a video to this effect, in which the author discusses how Xbox Series X | S optimized games can run on a regular external HDD or SSD, and when they can't.
The easiest way to tell whether or not a game may be played from an external drive is to examine its settings. Games may be played from conventional external SSDs and HDDs as long as their parameters indicate:
Durango App Model: XDKConsole Type: XboxOneGen9AwareGen
For example, games will not run from an external SSD or HDD if there are other settings.
If the game is capable of running from an external drive, it will, as will the game if it is not compatible with it. A message will be displayed when the game is installed to the external drive.
Difficult games that are designed for Xbox Series X | S and run on an external drive are listed on Reddit.