Should You Move From Shared Drives To A Data Room

When it comes to storing or sharing digital data, what is the first thing that typically comes to mind? That’s probably shared drive services like Google Drive or OneDrive. And you’ve probably used them not even once to send some documents to your friends or share photos from the latest event with the family.

However, can you rely on those solutions as much when it comes to sharing critical, sensitive data? That’s something to discuss.

Experienced dealmakers and seasoned business owners prefer to share confidential information in virtual data rooms (VDRs). Why? This article answers that question. Read on to understand the key virtual data room vs. shared drive differences and in which situations each solution is the best fit.

How Shared Drives Work and Where They Fall Short

Let’s first start with the basics and define what is meant by shared drives.

Shared drives are basically cloud storage spots like Google Drive or Dropbox. People use them to save all sorts of files and share them with others using a link. You can upload, download, and view files, and even work on them together to some extent.

For personal use or small internal projects, shared drives work perfectly. They’re simple, affordable, and deliver what they’re expected to. However, when it comes to handling sensitive business data, those services have several limitations:

• Limited control over external access. Even though Google Drive or OneDrive external sharing controls exist, most often, they are not as advanced as those offered by VDRs. As a rule, it’s pretty hard to trace who opens a link once you share it with a shared drive, and it’s even harder to stop it from being opened.
• No secure link expiry. With shared drives, shared links often stay active until someone manually revokes them. That means files could remain accessible long after the project or deal is over, which is definitely something you’d like to avoid.
• Weak version controls. During deals or complicated projects, it’s usually multiple people editing the same document. This can quickly lead to confusion about which version is final, which can drastically impact deal outcomes. That’s why version control for deals is so important, and that’s what VDRs offer.
• Basic collaboration. Yes, shared drives do offer certain collaboration tools. However, they’re usually pretty basic, which is not enough for communication during high-stakes deals like mergers and acquisitions (M&A). Deal participants will need more than simple comments on files.

So, as you can see, the main problem with shared drives is usually a lack of required security. And this is no joke, especially amidst rising costs of an average data breach.

What Is a Virtual Data Room, and How Does It Work?

A virtual data room is a cloud storage solution that offers users a centralized document repository to store and share documents securely. What’s more, VDRs also offer excellent collaboration tools and detailed audit trails, so users can get answers to arising questions quickly, and you can also monitor all the activity inside a VDR.

Unlike shared drives, virtual data rooms were created with security in mind. That’s especially important, considering how shared services might suffer from data breaches, like the one that happened with Dropbox in 2024, when a threat actor accessed customers' data of the Dropbox Sign service.

So, imagine shared services like Louvre that can be robbed within 7 minutes despite all the security measures, while virtual data rooms are like serious Swiss banks with a high level of security that no one can break.

Key Advantages of Data Rooms Over Shared Drives

So, where exactly are virtual data rooms better than shared services?

These are the main benefits:

• Advanced security. Watermarking, redaction, fence view, link expiration, remote wipe, IP restriction, and much more — these are dedicated security features offered by virtual data rooms. Modern providers treat security seriously, which makes VDRs perfect for cases when dealing with sensitive or confidential data.
• Full transparency. You will know who, when, where, and for how long each action is taken inside a virtual data room. This gives you full control of all the data room activity, meaning you can trace any suspicious events easily. However, having audit trails will even help prevent those from happening.
• Compliance support. All modern virtual data rooms are compliant with the core international and industry-specific regulations and laws like HIPAA or GDPR. It means that when using a VDR for your deal or project, you won’t violate any data privacy and management rules.
• Smooth collaboration during deals. VDRs usually offer Q&A modules where users can post questions and get prompt answers from experts. Additionally, there are comments and notes. All this is more than enough for a deal or due diligence to flow smoothly.

When to Choose a Virtual Data Room Over Shared Drives

You should consider migration from shared drives to a virtual data room when:

• You’re preparing for a complex financial deal, such as M&A, fundraising, an IPO, or restructuring.
• You need to share confidential business documents with external parties.
• You deal with a serious legal case that involves lots of confidential information.
• You coordinate real estate transactions.
• You handle board communication.

And this list is not complete. In short, you should use a virtual data room instead of shared drives in situations where the security of your data is essential. In this case, you can explore the variety of virtual data room solutions on dataroom.org.uk, compare them, and select the one that might benefit your deal.

Featured Image by Freepik.