Home Others Understanding Virtual Data Rooms And Their Significance Today

Understanding Virtual Data Rooms And Their Significance Today


virtual data room

by Gabriel Cabot, digital marketing strategist at Firmex, Inc

Before the advent of cloud technology and the Internet, company files had to be stored away in physical data rooms (PDRs). This required high operational costs like round the clock staff, abundant paper supplies and couriers. In addition, access to information stored in these sites was inconvenient because one had to travel to the PDR site. Besides the obvious financial and convenience strain associated with these rooms, users had to spend a lot of time sorting through thousands of files to get the information that they sought.

However, virtual data room software came as a huge relief to many companies because it reduced wastage of time and numerous expenses made to physically store data. Virtual data rooms (VDRs) eliminated the need to set up expensive PDRs. A 2012 study done by IBISWorld revealed that VDRs experienced a steady growth of about 17 percent annually as a result of technological advancements as well as the growth of global demand for these storage services.

What are Virtual Data Rooms?

VDRs are online repository sites for documents, files, data and other sensitive information about a company or a business entity. This data is stored on a secured online server that only allows restricted access to view, share or manage stored information. These services are offered by VDR providers and are managed by an administrator. The administrator issues different access levels to specific individuals according to the agreement and specification of the client company.

The Evolution of Virtual Data Rooms.

In the last 10 years, Virtual data rooms have steadily replaced paper-heavy and laborious Physical data rooms. The old PDRs were quite cumbersome due diligence processes. The switch from PDRs to VDRs resulted in deal cycles and increased valuations.

The benefits so far accrued from the use of VDRs is unprecedented. According to IBISWorld, the VDR industry grew at an incredible annualized rate of about 16.7 percent between 2009 and 2014. Additionally, the report predicted that this industry will see financial growth from $628 million to $1.2 trillion between 2012 and 2017 respectively.

Many global experts are in agreement that data security is the number one challenge that faces virtual data rooms. Therefore, it only makes sense that the technology currently used to protect and share sensitive information must be top grade. Today, VDR providers are using multiple-layered infrastructure to store, access and share data on their online databases. In addition, regular updates as well as round the clock inspection and maintenance is done to enhance security.

Benefits of VDRs.

These data rooms offer several specific benefits to users and business. Some of these benefits include the following:

Reduced cost of operations. This includes the cost incurred in purchasing papers, travelling and hiring related human resources.

VDRs protect stored data. These cloud based software programs are connected and operated on extranet. Extranet is secure because the general public has no access to the network.

These services offer online backup of all data in case of system malfunctions or massive data loss.

It is easy to set up and manage storage of data on these sites.
A client is able to control access to stored information because they set up administrative user restrictions and permissions.

Users enjoy efficient transfer of information and huge documents. Additionally, access and sharing of files is possible 24/7.

Access to information stored on VDRs can be done from any location in the world provided that the user has access to internet connection.

Uses of Virtual Data Rooms.

VDRs offer secure information storage solutions. These services have been used by companies to share information with outsiders like lawyers, auditors, partners or even customers. Information stored on these sites and shared to outside parties is highly confidential.

Mergers and Acquisitions.

Of late, VDR services have been used by companies that are undergoing M&A transitions. In the year 2015, global companies spent over $4.2 billion on M&A deals alone, making it the busiest M&A year in history. This unprecedented rise in M&A deals resulted in a significant growth in the total amount of data created and stored. This in turn led to the creation of online repository sites that enabled the distribution and storage of information by multiple parties. Today, VDRs have become integral to M&A transactions. This is because they enable easy, efficient and secure management of stored data.

Corporations and Financial Institutions.

In the current global economy, VDRs have gained mainstream acceptance by corporations and financial institutions for their secure storage capabilities. They are effective and convenient storage sites for critical information that is used in various corporate dealings including contracts, financial records and legal files. These online sites allow relevant parties and workforce to have easy access to information from anywhere provide they can connect to the internet.

Human Resources.

Corporations store employee records, confidential HR information and other management data in secure Virtual data rooms. This is especially useful for global conglomerates with various franchises and branches located in different parts of the world.

Research Purposes.

Online data rooms provide a secure, protected and reliable storage site for research data. This includes clinical trial discoveries, records, licensing and legal information as well as subject data used in research fields.


Accounting demands accurate audit trails that allow easy tracking of finances. Such vital information needs to be secured by a Virtual data room. This ensures the facilitation of tracking, management and sharing of financial records as well as other book keeping files.


Marketing professionals and departments use VDRs to store vital strategic reports, operational budgets and design mockups. These data centers also allow teams, located in different geographical locations, to communicate and share information securely.


Legal and compliance professionals can easily manage confidential files, discovery documents, client contracts and even trial transcripts using VDRs. This ensures due diligence is observed.

Virtual data rooms are highly innovative and efficient online data storage sites. CDRs are constantly growing and developing into highly secure sites that are popularly used by many corporations globally. Information stored in VDRs is highly confidential and potentially worth billions (if not trillions) of dollars. This makes such sites preferred targets by hackers and industrial espionage experts. Therefore, more needs to be done to make such sites secure and hack-proof.


gabriel cabot

Gabriel Cabot is a digital marketing strategist at Firmex, Inc who enjoys reading, writing and learning about new technologies, programming, and the Internet.


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