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The pros and cons of virtual data rooms

Virtual data rooms are a digital version of the locked file cabinet that is used for securely storing files with an access code. However, this isn't the only solution for digital collaboration. For example, there are more complex solutions to setting up a virtual data room, such as a virtual private network on a private cloud or public/private hybrid cloud. With that in mind, let's look at the pros and cons of virtual data rooms.


One of the many advantages of virtual data rooms is the cost of operation. Setting up virtual data rooms costs a fraction of the price of setting up a virtual private network. You can set up virtual data rooms for each project, case or customer and everything for that project is located there. You don’t need to set up multiple segregated servers for different customers unless exchanging terabytes of data. You also don’t have to dedicate a whole IT department to managing users. Instead you can set up the virtual data room and add whoever will be supporting the project.

The downside of virtual data rooms is the sheer number of VDRs you have to set up and then archive as time goes on. When you have the digital equivalent of thousands of filing cabinets (VDR) instead of a streamlined data management system, the VDR arrangement creates system bloat and slows it down. For this reason, virtual data rooms are a better choice for law offices, real estate agents and small businesses instead of large corporations that need to exchange terabytes of data with dozens of customers on a daily basis.

Speed of implementation

Aside from lower costs of operation and support, the virtual data room’s biggest advantage is the speed with which it can be deployed. If you receive a case or perspective real estate client, you can set up a virtual data room for that particular assignment in a matter of minutes. Then you can exchange digital files or post contracts to be signed in the VDR nearly as soon as the customer says they want one. This makes due diligence much easier by making documents easier to review early in the process and visible to the appropriate parties no matter where they are.

The downside of VDRs is the risk that people will skim digital documents without reading them in detail and then complain later to terms they agreed to. For this reason, attorneys still advise printing out forms and reading them before you apply a digital signature.


Virtual data rooms are very secure. The project by project basis also improves security, since a customer or client given access to one virtual data room cannot access any others. Compare this to the security risk of giving someone access to the entire server and then limiting their access to one particular project; you’re left hoping their permissions were set up correctly and there isn’t a general access level role assigned to the project that permits them to go snooping into other areas.

Another benefit of virtual data rooms is the automatic tracking of user accounts, such as who had permission at what time to access data and what they did in the system.

This trackability simplifies accountability and record-keeping. Note that this trackability eases record-keeping but it does not eliminate the obligation of the manager to ensure that only those with a need to know are given access.

Virtual data rooms do not necessarily meet the security needs of various types of data. For example, a doctor’s office cannot assume that a VDR meets HIPAA and other privacy standards mandated by law. Few virtual data rooms meet the strict IT security standards required for handling financial data. And virtual data rooms do not necessarily come with the uptime and data retention requirements you may be legally required to meet for certain types of records.


Virtual data rooms are an affordable solution for smaller and medium-sized businesses that reduce administrative overhead compared to other models and provide rapid, secure solutions for file sharing. Their downsides include bloated data structures compared to other data management models, the risk that people don’t do their due diligence, and the fact that most VDR don’t meet the highest levels of data security as required for medical and financial records.

2 Aug 2017 16:11


About Boris Dzhingarov

Boris Dzhingarov graduated UNWE with a major in marketing. He is the CEO of ESBO ltd brand mentioning agency. He writes for several online sites such as,,, Boris is the founder of and