The Switch From Physical Data Rooms to Cloud-Based Data Rooms

Virtual data rooms are relatively new services that found favor in the eyes of deal-makers rapidly. However, just a few decades ago no one could have dreamt of the functionality and security offered by modern virtual platforms – whenever businessmen had to share some documents they were using the services of physical data rooms. The idea behind them was pretty simple: businessmen brought piles of hard copies to land-based repositories and invited their partners, investors, etc. to check the documents. As there were no other options PDRs used to be pretty popular and demanded among deal-makers.

The switch from a land-based repository to a virtual one occurred not over one night: the transition took some time. But the more developed and equipped VDRs were introduced by vendors – the fewer deal-makers were eager to use physical data rooms.

physical data rooms

Why Did Physical Data Rooms Lose Their Positions?

Physical data rooms lost their users because the service was incapable of meeting the basic requirements of deal-makers. It turned out that all the functions of a PDR can be successfully completed by a virtual room. The following aspects accelerated the decline of land-based rooms:

  • Location-oriented repository

The very name of a physical data room implies that it is tied to a precise place. Hence, whoever is involved in a deal he has to go on a business trip to visit the PDR. Such trips require time and money.

  • Restricted number of visitors

One team is allowed to enter the physical repository at the moment. The other team has to wait for its turn to get an access to files. Due to such queues, any project requires more time than a project executed via a VDR which imposes no limits on the number of visitors that could work inside the room concurrently.

  • Time-consuming projects

The room owners have to wait for all the deal participants to arrive and then they have to wait for the queue to end. And the very process of PDR organization requires quite a lot of time as thousands of hard copies have to be prepared.

  • Limited opportunities for work

The visitors of land-based repositories can do nothing with the documents but look through them. There are no search tools that help to spot the required files in a few seconds, there are not programs that allow editing files, there are no tools that somehow speed up or facilitate the work inside the room.

  • No communication between the visitors

Whenever the users of a PDR want to discuss certain questions related to the deal they have to meet face-to-face or, at least, exchange emails. There are no instruments that allow an instant exchange of messages, on a contrary to Q&A module inherent to virtual platforms.

  • No uninterrupted supervision

When visitors enter a PDR they are being watched by administrators and security guards. But there is no chance that every action of every user would be noticed by them. Meanwhile, audit logs provided by virtual rooms inform the room owners about each action performed by any visitor.

  • One room for one project

There is no way that one physical room would be exploited for a few projects at the same time: it would be impossible to manage documents and visitors. Thus, the next project can be launched only when the previous one is over.

  • High price

To set up and to maintain a physical repository is pretty expensive. The owner has to pay for all the hard copies made, for the rent, for security guards and administrators that monitor whether no violations take place inside the room.

All the imperfections listed made businessmen switch to VDRs. However, there are certain cases when land-based rooms are still demanded. When the deal participants have to exchange product samples or any tangible objects they face the need to open a physical room: such things cannot be transmitted via the Web.

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