What are Virtual Data Rooms made for?

In this article, you will learn what the Data Room service is and what capabilities it provides to users. 

What is a Virtual Data Room?

Virtual Data Room is a platform usually created for a specific period and for a specific purpose, which provides authorized users with access to a secure database of documents, in accordance with their access rights. Initially, virtual data rooms were created as an alternative to physical data rooms for due diligence in M&A transactions.

Before the era of the spread of broadband Internet access, familiarization of potential parties to the transaction with documents looked like this:

  • The seller allocated or rented one or more premises in which folders with paper documents were demolished, and recorded in the expense item the rent or lost profits from the misuse of the premises.

  • A schedule was drawn up for visiting the room and working with documents for potential buyers (bidders), which, with a significant number of them, significantly increased the time of the transaction.

  • If the bidders were from another city or country, their representatives happily went on a business trip to world cultural centers and reluctantly – to industrial regions, spending time on the road and money on increased travel allowances.

Actually, the Virtual Data Room just solves the problem with time, cost, and easy access to documents.

Who needs it?

The circle of potential customers should not be limited to specific industries; first of all, virtual data rooms are needed by financial companies, construction, and engineering organizations, law firms, as well as communication service providers and retailers. They often work with critical information and need a means to securely send documents to external contractors or to remote branches. These customers require flexible configuration of access rights to documents, management of their life cycle, and even protection using DRM technologies.

In the telecom and financial sector, the used means of protecting user data and marking documents must comply with the requirements of regulators – this is another reason for choosing a specialized solution. In retail, merchandisers and sales agents have to be given access to trade secrets. Moreover, viewing documents on mobile devices and deleting them in the event of an employee’s dismissal also needs to be controlled.

Organizations that use VDR

So, in which organizations are the virtual data room applicable?

  • Financial sector. Companies that work with critical information are in dire need of secure means of delivery of documents and control of access rights to data for branches and external contractors;

  • Design organizations. Such companies often face a situation when a working group needs to provide access to data for a certain period and it is guaranteed to block (revoke) access to documents after the completion of the project;

  • Communication service providers. Telecom operators need tools to protect user data and label documents in accordance with regulatory requirements.

  • Retail enterprises. Retail organizations need to protect data that is on the devices of merchandisers and sales representatives and may have commercial value;