The benefits of cloud storage are now well understood, and chances are your organization already employs several types of cloud storage solutions for file sharing, collaboration, backup and recovery, or hosting business applications or services. Google Drive and Dropbox have become ubiquitous both at work and at home, and most of us are familiar with and benefit from well-known public cloud services like Amazon Web Services (AWS) or IBM Cloud.
What may be less clear is how the type of cloud storage solution you choose can impact the security of your sensitive data, how your corporation is perceived, and your ability to do business effectively with third parties. When choosing a cloud based solution, your business needs must be clearly defined, otherwise you’ll run the risk of using the wrong tool for the job, which can lead to frustration for users and put your sensitive data at risk.
In this guide, we’ll look at the categories of cloud storage solution available to corporations, their ideal use (e.g. what they’re good for and what they’re not), and introduce you to Virtual Data Rooms, a specialized class of cloud storage solution used by professionals to share their most sensitive documents and data with third parties beyond the firewall. Originally used for due diligence for mergers and acquisitions (M&A), VDRs are now widely used for a broad range of secure document sharing applications within corporations.
The Cloud Storage Options Landscape
Below is a brief outline of the various types of cloud storage services to choose between, each used by corporations for distinct purposes and procedures.
Enterprise File Sharing: This service allows users to store data within the enterprise on the cloud and access it from any device. It acts as a simple method for quick sharing and collaboration that does not involve going beyond the corporate firewall. Dropbox is the most common example used by many employees for cloud-based storage and sharing.
Cloud Backup: In the unfortunate case of accidental file deletion or disaster situation that leads to losing important data, cloud backup services are relied often upon. Many companies are introduced to and begin implementing cloud storage services by first using inexpensive cloud backup to prevent unexpected document loss.
Archive: For data that will rarely be accessed, companies use archive databases for regulation compliance or to maintain records of information that may no longer be relevant, but is still important. Much like cloud backup, it is inexpensive and is used for general data storage.
Object, Block and File Storage: These types of storage services are used for a variety of cases and differ depending on user needs. They also range in price because they vary in scalability and how easy it is to access data from any device, anywhere.
Data Warehouse: This type of service is used by enterprises to store data from a wide range of sources, primarily for business intelligence and management decisions. Data is stored in a single place, making it easy to analyze and mine for company reporting.
Data Lake: For data in its natural format, a data lake is used to store all enterprise data for tasks such as reporting and analytics. This type of service is a repository for a variety of structured and unstructured data and easily accessible whenever needed.
Hybrid Cloud Storage: This type of service uses both local and off-site resources so that frequently used data can remain secure when stored on a private cloud. It then supplements internal data storage with public cloud storage so that inactive data can be moved to the cloud while ensuring compliance and transparency.
Virtual Data Room: This type of solution is used when large numbers of files need to be securely shared outside of your organization. They offer specialized features to promote data security, document management, and complex user permissions allowing total control over who sees what, and when. Data rooms are used for a variety of complex processes such as due diligence, fundraising, litigation, licensing, RFPs, compliance, etc.
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What Makes A Virtual Data Room Different?
The most noteworthy difference between a virtual data room and the other cloud storage solutions mentioned above is that a VDR is used specifically to share large amounts of sensitive information with multiple third parties. Unlike generic document sharing services (or Enterprise File Sharing) they offer more user control with features designed to manage the risks that come along with sharing beyond of the corporate firewall, such as unwanted hacks or leaks that lead to data breaches.
Using a generic document storage solution, that is built for internal file sharing, to distribute confidential data with third parties during transactions such as M&A due diligence, fundraising/ IPOs, or litigation often leads to user frustration and document disorganization. A virtual data room acts as “Dropbox on Steroids” where business-critical processes are supported by specialized features and security features that help to manage sensitive documents shared during complex deals or transactions and maintain their security throughout process.
This solution is used by professionals to demonstrate accountability to the external parties they work with, such as financial institutions, potential partners, acquirers, funders, etc. If the 2012 Dropbox data breach shows us anything it’s that generic document sharing tools make it easy to share the wrong information with the wrong people and difficult to control the permissions of multiple parties invited to view documents. They also look less professional and are often blocked by large institutions for security reasons. Equating a virtual data room to generic counterparts like Dropbox or Google Drive is like using a screwdriver to hammer in a nail—the end goal is the same, but the processes getting there is much more complicated and confusing.
When your corporation’s most critical information is at stake, don’t trust a tool that isn’t purpose-built for secure document sharing beyond the firewall. In these cases, only a VDR will do, and that’s why many CEOs, CFOs, and finance professionals rely on VDRs everyday to share this sensitive information with third parties and support critical processes.
Illustration by Christy Lundy