What Are You Paying for with Virtual Data RoomsAuthor: Kathryn Gaw
Like everything else in our digital world, data storage has changed drastically over the last decade and, in some cases, has even come to mean a completely different thing. For example, if you needed a terabyte of storage a decade ago, you would have had to find a large-scale computer parts supplier and forked out at least $1000 dollars for the luxury of having this ugly looking hard drive on your desk.
Fast forward to today and if posed with the same problem, you would likely weigh up buying a pocket-sized hard drive for under $100 or ‘renting’ some cloud storage for as little as $10 a month. What was once a luxury commodity is now something we take for granted and is something we physically need. Everything we do involves storing large amounts of data.
Virtual data rooms meet this need by providing an online platform on which businesses can store and share confidential company data with potential investors and buyers. They have radically changed the landscape of the finance world and are commonplace among all mergers and acquisitions thanks to their ability to rapidly expedite the deal process and reduce costs involved with physical data rooms.
If you have been looking in the market for virtual data rooms recently, you would have noticed that some of the legacy providers, they have been around since the inception of VDRs a decade ago, pricing themselves way out of the market for a service that essentially provides a secured storage of data.
Why is this – you may ask
Nowadays, cloud storage is like fresh air – you don’t even notice you are using it 24/7.
10-20 years ago, when legacy virtual data rooms providers came onto the scene, setting up a cloud storage facility was a costly and time intensive process. The capital outlays and expertise needed to develop your own data centers and meet the security regulations were so high that only a few firms could enter the market, and those that did had to recoup every cent spent by charging their customers higher prices.
Paying extra for using more storage or increasing the number of users to the data room might seem excessive now, but it was necessary for these legacy providers as they attempted to repay the huge investments they had made in hardware. Some of these providers still haven’t turned a profit and so are forced to retain these high prices.
With the developments in the last 10 years significantly reducing the costs of physical and cloud storage, many more providers have entered the market through being able to outsource the storage and security at a fraction of what it would costs to build from scratch. This allows them to charge super competitive prices as they essentially have little or no fixed costs.
By in large, the legacy providers have managed to stay in business because of huge corporate firms making use of their service without really having the need to worry about their bottom line. When you’re selling your company for millions, you aren’t too concerned about footing a bill of $50k to your virtual data rooms provider. However, things change when smaller companies, or those looking to list or undergo financing rounds need to make use of virtual data rooms. Suddenly, CFOs are looking at the price of their virtual data rooms providers because they will have to keep paying the bill.
It is an unfortunate turn of events for the pioneers of the virtual data room space, as they are left trying to scrape every bit of revenue they can get to repay their huge debts of the past. Newer, lower-cost alternative are starting to eat into the market and are gaining popularity in small to mid-sized firms who are more price sensitive and perhaps less worried about security than their larger counterparts.
For now, there is still a market for expensive corporate data rooms but as industry security and the trust in cloud computing improves, the newer providers are set to grow. There are multiple sources available to compare online data rooms providers on a host of features including price so that smaller businesses can be assured they are not overpaying.