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Virtual Data Rooms vs. Physical Data Rooms

    
virtual data room

Traditionally, data rooms are physical rooms, kept secure with constant surveillance, where authorized parties go to review sensitive company information. This is necessary during many legal or business dealings, such as property sales, mergers & acquisitions, IPOs, share sales, business litigation, or audits.

For a physical data room, the company needs to keep the room on premises or pay to use a room somewhere else, such as in their lawyer’s offices. Logs need to be kept of who accesses the room and who sees which version of each specific document. Since this type of data room is in a physical location, people have to be there in person to view the information, which leads to additional costs and inconveniences. For example, during a sale the bidder may need to be flown in to access the necessary documents. The same would be true of lawyers during litigation or of an auditor during an audit.

While this ensures confidential information is not easily leaked, it is far from convenient or cost effective for any of the parties involved.

The Introduction of Virtual Data Rooms

Virtual data rooms, managed in the cloud, have simplified this process. Since the files are stored digitally, it’s unnecessary to secure a physical location.

Those who need access to sensitive information no longer need to be flown in and put up in a hotel; they can simply be given access to the necessary files virtually. To ensure security and protect against data leakage, access can be easily revoked when it’s no longer needed, for example if the purchase falls through or when an audit is completed or even when a certain team member has completed their specific tasks.

Virtual data rooms can automatically keep track of who accesses the available documents, when they've accessed documents, and the specific documents they have viewed. Using permission-based roles, companies can configure different access levels for the different individuals involved. With the multi-factor authentication processes and 24/7 third-party monitoring available in certain virtual data rooms today, files are kept safe, if not safer, than if viewed in a hardcopy version.

The added convenience and inherited cost savings have sparked a trend: virtual data rooms and cloud storage are quickly replacing physical data rooms—a trend that is expected to continue to grow.