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What Are the Benefits and Drawbacks of Data Rooms?

The virtual data room market has seen exponential growth, especially in the Covid-19 era. The global data room market has already hit the billion-dollar figure and is expected to reach $3 billion by 2027.

Although the Covid-19 sanctions forced businesses to look for digital routes, virtual data rooms were already a crucial component in the global M&A sector. Today, it is an every-business solution across the world.

However, the global fame of electronic data room technology stands with some drawbacks as well. In this article, you will discover:

  • What is a virtual data room?
  • What are the advantages of online data room software?
  • What are the drawbacks of data room software?

What is a virtual data room?

A virtual or electronic data room is a digital repository for corporate document management and virtual collaboration. Millions of businesses, entrepreneurs, professionals, and government institutes use data rooms for storing, sharing, distributing, and managing confidential or commonly used documents.

Also, VDRs are more than data management platforms — they are enriched with numerous project management and digital communication tools. That is why virtual data room software is globally employed for board communications, fundraising, mergers, acquisitions, fundraising, private equity ventures, and real estate transactions.

Advantages of virtual data rooms

1. Enhanced data protection

Data protection is the backbone of virtual data room technology and its biggest selling point. A large number of businesses and professionals employ data rooms just because of their digital security. The security system in virtual data rooms is divided into different layers. Here is a brief explanation of some of the most important security features in VDRs.

  • Multi-location data servers. All high-quality virtual data room providers boast multiple data servers in different locations. These servers have a backup of the files you upload in your VDR and protect your data from accidental losses.
  • Two-factor authorization. Almost every data room service provides a two-factor authorization feature that keeps unauthorized users away from the VDR.
  • Data encryption. Some of the best virtual data room providers, like iDeals, DealRoom, Ansarada, and Merrill, have powerful data encryption (256-bit SSL) features. Such strong data encryption is only used by the military, financial and government institutions.

2. Document control

In addition to data room security, online data room software makes sure you have full control over the data flow in your VDR. That said, you can:

  • Customize the access level for users individually
  • Restrict anyone from accessing any file, page, or folder
  • Limit any user from editing, altering, deleting, annotating, printing, scanning, downloading, or saving a file
  • Revoke access to any document at any time
  • Remove any device logged into the VDR and purge all the documents browsed or downloaded from the VDR
  • Restrict users from taking screenshots or photos of any file using the Fence View mode

3. Seamless communication

As mentioned earlier, data room technology is a great collaboration tool for corporate boards. Board members plan, schedule, and manage their meetings using virtual data rooms. VDRs allow them to create meeting agendas, assign and manage tasks, give presentations, record and distribute meeting notes and minutes, cast votes online and sign documents electronically.

Apart from that, the Q&A module is highly useful in project management as it helps ask and answer questions immediately. Other notable communication tools include chat messengers, online polls, group chats, and dedicated email.

4. Remote accessibility

Being able to access your corporate documents remotely and participate in business meetings from anywhere is modern-day work culture, and virtual data rooms help you with that. You don’t have to carry your laptops everywhere.

The dedicated data room apps allow you to access documents and communicate with other users from your mobile phones or tablets.

5. Reduction in administrative expenses

A virtual data room is a paperless data and meeting management solution. You can use, edit, and share digital copies of your business documents, which ultimately minimizes the need for paper documents. Fewer paper documents mean less paper, printing, and distribution expenses.

Data room software also reduces the need for physical business meetings, cutting administrative expenses further.

Disadvantages of virtual data rooms

Limited functionality

Many virtual data rooms have basic security and communication features. However, this happens when you employ cheap VDR services. Data rooms like SecureDocs, Sharevault, or iDeals give you more value at budget-friendly prices. Similarly, you may face connectivity issues and server problems from poor-quality VDRs.

Final words

Virtual data room technology is just beneficial. Its drawbacks usually stem from poor data room services. Hiring certified and recognized data room services not only protects your data but also allows you to enjoy the distinguished features of this technology.



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