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Virtual Data Rooms – When and Why Do I Need Them?



Virtual Data Rooms - When and Why Do I Need Them

The importance of handling information in a secure way is today a highly relevant issue, especially when it comes to digital flows with special requirements for authorization control and traceability. At the same time as the GDPR, during the next year, enters into force and information security is becoming increasingly important, businesses at the same time place higher demands on critical processes to go faster and that the systems that support these processes must be more mobile.

A common type of process where the above requirements are relevant are merger and acquisition processes, where fast virtual data room are the most common system support. Virtual data rooms (VDR services) are often a cloud-based storage area  where you can  securely share information with advanced access management. This type of service is usually used in merger and acquisition processes, company inspections, IPOs, restructuring and procurement, etc.

In other words, VDR services are aimed at companies that have a need to share information (often of a very confidential nature) with both internal and external parties during business processes of various kinds. The question that many may ask themselves in this context is; why do we need a virtual data room when we have SharePoint, Dropbox  or similar? This question is one of the questions we will try to sort out in this blog post.

Why We Need Virtual Data Room?

First of all, we need to figure out  what sets a virtual data room apart from other cloud-based storage services. The biggest difference between VDR services and other storage areas lies in the functionality itself:

  • Advanced rights management
  • High security with features such as multi-factor authentication (MFA), encryption and extensive traceability
  • Reporting functions at activity level
  • Index functions (to clearly show the file structure on documents, attachments, etc.)
  • High level of 24/7 support by default
  • VDR services are not intended for long-term storage

VDR services are thus excellent for sharing information in processes where different user groups (such as buyers and sellers) should have access to the same information but with different rights. For example, often one group should only have read rights (to certain selected documents) while the other group should be able to read, change, upload and print information, etc. At the same time, the administrators should be able to get reports such as shows who has read which document, which pages have been read, and for how long. This gives i.a. valuable information about which buyers are the most likely based on how much resources they devote to the business.

The range of virtual computer rooms is large, and there is everything from large established providers to smaller and more niche players. There are also very large price differences between the various VDR services, while it is seldom clear what added value the more expensive suppliers add.

Which service is best suited depends on several factors. Questions to think about include what process the service should support, what requirements there are for security and functionality, what degree of support and service you (and your business partners) need, as well as budget frameworks and the information life cycle. These are just some of the ways in which choosing a VDR provider can be a challenge.

Read Also: Why Do You Need A Virtual Office Address And Mailbox Rental Services?

Who are the Best Virtual Data Room Providers?

After doing an in-depth research, we come to the conclusion of best VDR providers in the market. Depending on your requirements, budget, business requirements, due diligence requirements, and legal requirements, you need to choose the right one after careful examine.

We don’t support any of the providers below but they are selected according to customers reviews, their performance, budget friendly, functionalities, and other factors:

  • Docurex
  • Blackberry Workspace (WatchDox)
  • Drooms NXG
  • Merrill DatasiteOne
  • Nasdaq’s Board of Directories
  • Brainloop Secure Dataroom
  • Citrix ShareFile VDR

Here are some points most VDR services have in common:

  • The main target group is (often) larger and transaction-intensive companies with a high willingness to pay.
  • The services are relatively homogeneous when it comes to technology and functionality.
  • The VDR services are intended for short and specific business processes, not for long-term storage.
  • High level of service and support is included in the service 24/7/365, often with a dedicated contact person.
  • Unclear pricing model: VDR services are often priced based on how long they are to be used, how many rooms are used and how much data is to be stored. This is often measured in the number of pages in the data room rather than the number of GB of data.
  • There is low transparency around prices and price models and most suppliers do not have public price lists.

In the market, there is thus generally a large discrepancy between the prices in relation to the quality of the services, and  the most expensive is not always the best.  There are also worldwide dataroom providers that offer similar services at lower prices but with different forms of restrictions. Different industries tend to use VDR services in different ways, which is not always reflected in the supplier’s standard price model. Our advice is therefore to invest time in identifying what your processes look like, conduct a clear dialogue with the supplier about how the service should be used, and thereby clarify your internal and external requirements.

Wrong Requirements Effect

It is very common today for VDR services on behalf of the end customer to be ordered by lawyers or financial advisers. The risk of not involving a party with technical insight in the choice of VDR provider is that the service ultimately does not reflect your internal or external requirements . There are technical requirements that should be met to get an efficient and secure solution, which depends on the underlying technical platform, as well as requirements for where data is stored and processed. The consequences of a bad or non-existent set of requirements can mean that:

  • The cost becomes unpredictable or unnecessarily high.
  • An inflexible access to the information for the user.
  • Technical and information security-related requirements are neglected, which in turn means increased business risks or even worse.

Virtual data rooms aim to support business processes that are not only associated with tight deadlines and high costs, but also processes where the tolerance for data loss or downtime is non-existent. Therefore, it is of great importance that the service reflects all your requirements. In summary, choosing the right service can both reduce your costs and streamline your processes by simplifying it for users, but above all, the right choice can significantly reduce your business risks.

James Smith is the writer for Munchkin Press. He is a young American writer from California and is currently traveling around the world. He has a passion for helping people and motivates others.

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