The Future of Virtual Data Room Technology

Virtual data rooms have come a long way over the last two years, let alone the last decade. With humble origins in the original physical data rooms that drove deals and transactions for over a century, VDR Technology has flourished and grown from being a purely digital form of their physical predecessor to a technological solution for every business in the 21st century.

Their transformation has continued in recent years as virtual data rooms have become more of a data service than a data solution. This is typically what happens when a product or service goes from being a complete rarity to an almost commodity as virtual data rooms have. What this means is that virtual data rooms providers are developing their platform with the aim of improving the overall service through focus on user interface design and usability.

The boom in virtual data room technology over the last five years was caused by the realization that virtual data rooms provided value to businesses over and above their being used as a way of securely sharing data. The typical data room platform now encompasses things such as workflow reporting, audit trails, M&A prospecting and even live discussions to name a few. All of these fall outside of the traditional document management sphere and characterize the extent to which virtual data rooms are being implemented.

As the industry edges towards annual revenues of $1 billion, what does the future hold for providers, users and investors in virtual data rooms as well as for your average person who has never heard of one?

The good news for businesses is that as the market for virtual data rooms expanded, newer platforms run by younger companies entered the space and undercut prices of more traditional providers. They could do this because of the improvements in infrastructure over the last decade have driven down the price of data storage exponentially. With most physical data management outsources to huge multinationals such as Amazon and Google, the platform providers could spend more time and money on developing an intuitive user interface.

Although not being the pioneers in the industry, it was these newer firms that really unlocked the potential of virtual data rooms. Understanding that these are essentially people (employees of businesses) that interact with the platform was critical in the meteoric rise in popularity of virtual data rooms over alternative data solutions.

Once their usefulness as a collaborative but secure tool in mergers and acquisitions became apparent, businesses started using virtual data rooms as a broader corporate tool that facilitates collaboration and communication in a structured environment, all while maintaining very important, but often overlooked factor  security.

The future of virtual data rooms lies in its promise of security. Security of documents, secure communication, secure internal reporting, secure deal prospecting.

With emails no longer being the secure method of communication that they were once considered to be, businesses are turning and will turn to virtual data rooms to fill the role. Along with endless opportunities to modernize the way we have always communicated in the corporate world, there also lies the possibility of a fully integrated centralized system from which documents can be stored and accessed, co-workers and bosses can be reached and virtual business meetings can be held, all under one highly secure umbrella of the virtual data room platform.

All processes and functions within the platform can be monitored, both internally and externally, and records of communications and transactions can be easily stored and brought up at a later stage if needed for legal or strategic reasons. With this level of integration, businesses are set to realize significant efficiency gains, which should flow through to cost reductions in multiple departments.

It looks as though the natural progression towards a centralized virtual business platform will pave the way for what many are calling the virtual office space eliminating the need for commuting, physical buildings and a host of other unnecessary expenses. While that may still be a few more years or decades away, what is sure is that virtual data rooms (more precisely the service they offer) have firmly cemented themselves in multiple industries and the economy as a whole.