The Difference Between Virtual Data Room and Cloud Storage
Virtual data rooms and cloud storage are both innovative IT solutions used across different sectors. As the IT industry rolls out more and more data, the need to safeguard information from unauthorized users and hackers has grown over the years — making both virtual data room solutions and cloud storage more attractive. They both function similarly but have some distinguishing features. Each is better for certain industries, but IT considers both to be indispensable.
In this article, we look at them individually and highlight their differences and what makes each unique.
What is a virtual data room?
A virtual data room solution is a secure online repository used to store and share sensitive data or documents across a group of users. The virtual data room is best used for deals which is why it’s sometimes known as the deal room. Deals like M&A are best done with the virtual data room while it can also be used for auditing, fundraisers, due diligence, and effective collaborations between businesses. Virtual data room providers offer the service to clients in the business world and virtually any sector in need.
What is cloud storage?
A cloud storage solution allows users to store data and documents on the cloud (off-site location), which can be accessed anytime via a public internet service or a private network. The cloud storage solution is managed by a third-party cloud storage provider who does the hosting and also manages the server ensuring that documents stored in it are secure and easily accessed when needed. Files in cloud storage can be shared with authorized users, just like in a virtual data room.
Virtual data room vs cloud storage: The differences
Cloud storage and data rooms offer users an exclusive repository to store large and sensitive information away from the regular on-site storage solutions. Both also offer users unlimited access to the information stored when needed and can allow for this information to be shared.
However, the virtual data room stands out in the following ways.
- Security. The virtual data room is more secure than cloud storage solutions with many security protocols to ensure information is not lost to hackers on the cloud. Some virtual data room security measures include rigid encryption, digital watermarks, audit logs, two-factor authentication, document restrictions and permissions, and IP or device location checks.
- Effective communication & collaborations. This is another area where the virtual data room trumps cloud storage in functionality. Corporate business use a VDR to collaborate in deals and partnerships as it provides a secure cloud destination where files can be shared among participants in the room, including a Q&A session for effective interaction between both parties. If any new document is needed, it can easily be uploaded and viewed by authorized users.
- Monitoring. The virtual data room makes it possible for the administrator to monitor every activity in the room in real-time. This ensures that no information leaves the room without the authorization of the administrator.
- Document permissions and restrictions. A data room admin can permit and restrict access to anyone in the room. While in the room, an admin can also limit the amount of information available to any participant granted access. This makes it more secure which is the topmost priority.
- Use cases. One of the advantages of the data room software is its numerous use cases for which you can’t even use a cloud storage solution. Some of the use cases include due diligence for M&A or an IPO, fundraisers, partnerships, audits, and capital financing.
When to use cloud storage
Cloud storage solutions can be employed when you need to back up your files for safe storage or to recover data after a loss. It can be used to store personal data, pictures, videos, and other media files. However, when it comes to storing important information that, when leaked, could endanger an organization or partners in a deal, cloud storage shouldn’t be trusted due to weak security.
Data security guarantees
Providers boast that virtual data room security is the highlight that makes it a top choice for sharing and storing data for various business sectors worldwide. From government agencies, businesses, and NGOs, data security has made virtual data rooms prominent. Cloud storage solutions are questionable when it comes to security and shouldn’t be trusted with sensitive information, but they are the best for simply storing and backing up information.
Why is the data room best for M&A due diligence?
Due diligence is an essential process that must be complied with before any merger&acquisition deal is sealed. Consequently, only specialized virtual data room features provide the needed convenience, security, and accessibility to carry out M&A due diligence.
The virtual data room is also ideal for effective communication between both parties when bidding or entering into a partnership. Both can communicate and eventually collaborate online from the comfort of their offices, and no information is put at the risk of theft while the process lasts.
Virtual data room solutions are similar to those offered by cloud storage but differ when it comes to adequate security, effective collaborations, permission restrictions, and many other features offered by online data room providers. However, cloud storage isn’t entirely a bad idea. For example, usually it’s free or, at least, a much cheaper option, and can allow for file sharing — but it lacks security.