How Multimillion-Dollar Virtual Data Rooms’ Market Has Grown in 2017Author: Kathryn Gaw
The birth and commercialization of cloud computing software over the last 15 years has given rise to a number of powerful storage and sharing tools. Virtual Data Rooms (VDRs), are arguably one of the fastest growing and more powerful of those tools. With features allowing for superior data security, organization and access control, the VDR market has seen revenues upwards of $800 million in the last few years. And it’s only rising. Here’s a short look at the recent growth of the VDR market, where it is now, and how it’s predicted to grow over the next 5 years.
First, what is a Virtual Data Room and how does it benefit your business? VDRs, put simply, are digital versions of the tried and trusted physical data rooms that were used for so many years to store important legal and confidential documents. However, advancements in technology allow VDRs to provide greater security and efficiency of use than their predecessors. With the whole world moving toward a paperless future, it’s no secret that companies are moving to the online version for posterity’s sake. Administration problems that arose from the use of physical data rooms, such as having to physically be present in the room or having to organize documents into sections by hand, have all but been abolished because of VDR technology.
Virtual Data Rooms are an invaluable tool for companies dealing with mergers and acquisitions (M&A), due diligence, initial public offerings (IPO) and any other information sensitive processes. Replacing cumbersome and difficult methods of manual organization and access control, the features of VDRs really do go hand in hand with the above mentioned sectors. The ability to keep an audit trail of who has viewed what documents means that the once complex due diligence process is now a formality, and this is of great use for a number of sectors in the global economy. The same features allow M&A teams to keep track of which documents their clients seem most interested in, and can use that information to their advantage. This advantage, hopefully, could lead them to a successful transaction. With a total of just under $5 trillion worth of investment in the M&A sector worldwide in 2016 alone, you can see why improved efficiency is so important.
So now that we know what a VDR is, and why companies are employing their use, let’s take a look at the growth statistics leading up to 2017. And let me tell you, they’re impressive. In 2016, there was an estimated $839 million in market revenue from a total of approximately 240 VDR providers by the end of the year. According to IBISWorld’s 2016 report, there was an average of 13,7% annual revenue growth from 2011-2016, with the 4 largest firms in the market estimated to make up 73% of that revenue. Even though there is a large number of firms, the market is concentrated and is predicted to remain relatively so for the next while. Smaller firms still manage to stay relevant by providing more niche solutions, and the continued rise of digital evolution leads to a prediction of 12% annual growth of number of VDR providers.
With predicted growth in 2017 in huge sectors that are dependent on technologies such as VDRs (M&A for example), it is reasonable to expect increased investment and growth in VDR technologies. Aside from serving M&A departments, the VDR market has its own fair share of developments in the sector. For example, IntraLinks was acquired by Synchronoss Tech in January of 2017 for $821 million. Even with political uncertainty in the US and EU markets, growth should continue as massive corporate conglomerates from China and the like continue to express interest in investing in technology solutions; a promising opportunity for the growing VDR market.
Having said this, what might the future hold for the Virtual Data Rooms’ market? Well, given the state of flux that many technology sectors find themselves in, it seems that VDRs are no exception. Unlike other sectors in the global economy that tend to be subject to ebb and flow, markets like the VDR market only seem to be growing. The constant improvement of IT infrastructures will lead to new and innovative technologies being provided by VDR solutions, as they have in the past decade. The future (and the present for that matter) is a promising one for the Virtual Data Room market.