Why Do Businesses Choose Virtual Data Rooms over Physical Ones?

As businesses gradually modernized, physical data rooms went out of style giving way to digital file storage. Virtual data rooms have gained popularity in recent years, due to companies searching for more secure and time-intensive means of storing and sharing information.

The safety of your company’s most vital information is paramount, as a data breach could lead to major business problems and sometimes even litigation. So, why do businesses prefer to invest in virtual data room software over more traditional storage? Keep on reading to find out.

What is a data room?

A data room is a safe place where companies’ privileged data is stored. This is usually used for legal proceedings, but also mergers and acquisitions transactions. During mergers, the data room is mainly set up in the business office of the seller, where all concerned parties meet to access documents. This allows buyers to access all necessary information quickly and easily. Data rooms are commonly used for a variety of other purposes as well. The most common ones include real estate, IPO, fundraising, due diligence, etc.

There are two types of data rooms, namely:

  • A virtual data room is an online database that provides a safe and secure location for companies and firms to store their documents. This serves as a hub where employees, clients, and administrators can gain access to company information with ease. Forward-thinking industries like private equity, pharmaceuticals, law, and corporate finance have adopted this technology to further smoothen their storage processes. With online data room services, companies gain greater flexibility in controlling data access.
  • Physical data rooms have a physical location that is made available by a company to store its sensitive documents, especially legal and financial. It serves as a mutual, central physical space between an organization and its clients/buyers, where it is continually monitored and secured to limit access.

Why do businesses choose virtual data rooms over physical ones?

Physical data rooms have been in use long before the advent of VDR software, but as a ‘brick and mortar’ means of storage, it does have its limitations. Below are 3 reasons why businesses now pick a virtual data room over the more traditional ones.

1. Virtual data rooms are cheaper

Physical data rooms are slowly going out of style majorly due to their immobile nature. Once it has been set up, it requires a lot of time and effort to uproot and transfer from the location it is situated. However, virtual data rooms provide a cloud-based solution that exists only online, so it may be accessed from anywhere in the world, with its location easily modifiable.

Also, physical data rooms require land, which leads to expenses like rent, maintenance, and security to keep the place secure and running. But with VDR software, no upkeep or rent fees are paid, your information is safely stored on a secure online server.

2. VDRs improve business efficiency

Online data room software greatly reduces the stress and time involved in gaining access to and sharing information. With the use of the internet, documents can now be easily viewed via computers and smartphones worldwide which increases the speed of the process.

The physical data rooms have a definite location which means that every user will have to be there in the flesh to access files. This drastically slows down financial processes and impedes the efficiency of the whole company. The digital nature of a virtual data room gives it a major advantage as it gives its users remote access to their files and documents.

3. Online data rooms offer tracking and analytics features

Online data rooms feature an audit trail that logs in when users accessed a file and for how long. This is a dominating characteristic of the virtual data rooms, introducing companies to a whole new world of accountability. With traditional data rooms, you can only keep track of who accessed the data room but not what files they viewed. The best data rooms boast advanced tracking features that help you effectively monitor your company files.

Online data room software ensures confidentiality in communications via its services. It lets you answer specific questions to specific bidders during acquisitions without the knowledge of the others. Its secure nature trumps that of physical data rooms which are dependent on the discretion of other parties.

Conclusion

As the world digitalizes, the need for physical storage is quickly fading away. This is because companies and businesses now require more flexible storage space for their sensitive documents.

Virtual data room providers are constantly adapting their software to plug every hole left open by traditional data rooms. If you’re looking to run a successful and efficient business, data room software is the future and there’s no way around it.

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