What is a Virtual Data Room?
A Virtual Data Room (also referred to as a VDR) is an online bank of information that can be used to store documents, data and information, it can also be used to distribute the same items from.
What is a Virtual Data Room used for?
Often, a VDR is used to assist the ‘due diligence’ process, which is a process that is used to investigate a person or company before a contract is signed, to ensure that the process is legal. Commonly this process is used when a loan, contract, or transaction is being performed as part of a business.
Originally, a physical ‘due diligence’ data room was used to check disclosure of certain documents. However, as technology has become a more prominent part of daily life and the business industry, and with an increasing number of businesses wanting to save money, improve efficiency and boost security, virtual data rooms have begun to replace the physical ones that were once used.
How does it work?
A VDR is known as an extranet, a controlled private network that only allows secure access, it is essentially a website that has limited access which is granted via a secure login. This login should be supplied by the company whose extranet is being used and should be able to be disabled at any point, should the client or partner choose to leave the company.
The information within this ‘space’ is classified as confidential, and it is often not allowed for any of it to be released to third parties for this reason. This means that no forwarding, copying or printing is allowed - these things can often be disabled via settings. This rule is applied to protect the data that is used and shared within the ‘space’.
What came before VDRs?
As mentioned above, around 25 years ago, physical data rooms were still being used. However, when it was realised that these wasted time, money and resources, a new approach was found - this was known as ‘Early Electronic Data Solutions’.
As computers began to become more mainstream, research began into how computers could be used to make this process easier. Back then, the use of these rooms required people to spend hours scanning documents into them, so that they could be properly utilised. Once the files were scanned in, they then had to be organised into folders.
Most of the Early Electronic Data Solutions, although more eco-friendly than physical rooms, were not as effective as they could have been. They were time-consuming and costly, with many requiring the use of specialist software that did not come cheap.
As time went by, advances were made, which led to the used of the VDRs that we use today. These data rooms are not only easy and convenient to set up, use and access, but they are also affordable and highly secure. They combine seamlessly with cloud computing, which is something that most of today’s businesses rely heavily on for their sharing and storage needs.