Businesses handle vast quantities of sensitive information every day – especially during a merger or acquisition, or during investment fund raising rounds. But how do you securely transfer files during those critical transactions while ensuring robust data security?
You have two options: secure file transfers or virtual data rooms. Each has its own pros, cons, and use cases to consider.
What Is Secure File Transfer Software?
Secure File Transfer Software, often abbreviated as SFT, is a comprehensive solution designed to streamline and secure the process of transferring files. It’s an all-in-one system that supports multiple file transfer protocols, providing a centralized approach to managing file movements within an organization.
The software is equipped with audit reporting and automation capabilities, eliminating the need for programming or special skills. This makes it a user-friendly tool that saves time while enhancing security.
SFT solutions are not all created equal, but they typically come with a basic set of security features and protocols. These include SSH FTP, FTP over SSL, HTTPS, OFTP, and AS2, among others. Managed file transfer software offers additional benefits such as enhanced security capabilities, automation, and compliance features.
These protocols ensure that the software solution is compliant with various data protection regulations, making it a reliable choice for businesses that prioritize secure file transfer solutions.
How Does Secure File Transfer Software Differ From a VDR?
VDRs (Virtual Data Rooms) and secure file transfer software are both tools used for sharing files securely, but they have some key differences in purpose and functionality. Imagine a VDR as a secure virtual building with different rooms. Each room can be accessed by authorized personnel with specific permissions, and documents stored within are well-organized and tracked. Secure file transfer software is like a secure mailbox – you can send and receive files with varying levels of protection, focusing on file transfer security, but it lacks the organizational and access control features of a VDR.
Here is how they differ:
Focus
VDRs function like a secure online vault where access is strictly controlled. They prioritize features that facilitate collaboration within a defined group, such as granular access controls. This means you can assign different access levels to users (view-only, edit, download) for specific documents or folders, ensuring that authorized personnel can see what they need.
You can also set permissions for activities like printing, copying, or downloading documents to prevent unauthorized distribution of sensitive information.
In-document annotations enable secure communication and clarification requests within the VDR platform, eliminating the need for unsecured email exchanges. Users can also track changes made to documents, ensuring everyone has access to the latest version and preventing confusion, and maintain a comprehensive record of user activity and document access for security purposes and to demonstrate compliance with regulations.
Secure file transfer software, on the other hand, focuses on the secure transfer of files between individuals or organizations. It prioritizes functionalities that enable:
- Encrypted File Transfer: Ensures data confidentiality during transfer and storage, protecting sensitive information from unauthorized access.
- Secure File Transfer Protocol: Utilizes an encrypted file transfer network protocol that operates over a network lacking security, offering encryption of commands and data, and preventing open transmission of passwords and sensitive information.
- Password Protection: Adds an extra layer of security by requiring a password to access the transferred files.
- File Expiry Dates: Set a specific timeframe for how long recipients can access the files, adding an extra layer of control.
- Large File Transfer Capabilities: Allows for secure transfer of large files that might be challenging to send through traditional email attachments.
- User-Friendly Interface: Designed for ease of use, enabling even non-technical users to send and receive files securely.
Security: Secure File Transfer Protocol
Both VDRs and a secure file transfer service should offer robust security features like encryption and access controls. However, VDRs may have additional security measures in place due to the often highly confidential nature of the documents they handle (e.g., two-factor authentication, watermarking).
Cost
VDRs typically have a subscription-based pricing model, with costs varying depending on storage space, user access, and features offered. Secure file transfer software can range from free options with limited features to paid plans with more advanced functionalities and larger file size capacities.
VDR vs. Secure File Transfer Software in M&A: Pros and Cons
During mergers and acquisitions (M&A), secure document sharing is crucial for due diligence. Here’s a breakdown of the pros and cons of using VDRs (Virtual Data Rooms) compared to secure file transfer software:
Virtual Data Rooms (VDRs):
Pros:
- Enhanced Security: VDRs offer robust security features like encryption, access controls, and audit trails, better suited for highly sensitive M&A documents.
- Streamlined Due Diligence: Features like document organization, version control, and Q&A modules facilitate efficient information access and communication for acquirers.
- Collaboration Features: VDRs allow authorized users from both companies to collaborate securely within the platform, fostering a smoother due diligence process.
- Centralized Repository: All M&A related documents are stored in one secure location, eliminating the need for scattered file sharing and improving information retrieval.
- Scalability: VDRs can accommodate large volumes of documents and multiple users, making them ideal for complex M&A deals.
Cons:
- Cost: VDRs typically have subscription fees that can be higher compared to basic file transfer software.
- Learning Curve: Setting up and navigating a VDR might require some initial training for users unfamiliar with the platform.
Secure File Transfer Software
Pros:
- Cost-Effective: Many secure file transfer software options have free versions or lower subscription costs compared to VDRs.
- User-Friendly: Most software offers a user-friendly interface, making it easy for users with varying technical skills to transfer files securely.
- Basic Security Features: Encryption and password protection ensure a level of security for transferring confidential documents.
- Fast and Efficient: Secure file transfer software can be a quick and straightforward option for sending a limited number of documents.
- Managed File Transfer: Managed file transfer software offers additional benefits such as automation features, integration with data security solutions, and compliance with data protection regulations, which can be crucial for enterprise businesses.
Cons:
- Limited Security: Compared to VDRs, secure file transfer software lacks features like granular access control, audit trails, and document collaboration tools – all crucial for M&A due diligence.
- No Centralized Repository: Documents might be scattered across different email threads or file transfer sessions, hindering easy access and organization.
- Version Control Issues: Version control features might not be present, leading to confusion about the most recent version of a document.
- Limited Collaboration: Secure file transfer software is not designed for collaborative document review and communication needed during M&A due diligence.
Choosing the Right Tool:
For M&A deals, a VDR is generally the preferred choice due to its enhanced security features, streamlined due diligence process, and collaborative functionalities. While secure file transfer software may seem cost-effective, the risks associated with limited access control and lack of collaboration can outweigh the cost savings. However, for smaller, less complex deals with a limited number of documents, secure file transfer software could be a viable option, provided the security features meet the specific needs of the deal.
Choosing the Right Tool: Secure File Transfer Software vs Virtual Data Rooms
Both solutions have specific use cases to consider. You should use a VDR for controlled, multi-user access to sensitive documents within a specific context, such as M&A due diligence, investor relations, regulatory compliance, or legal proceedings. Collaboration features and detailed access control are crucial in these scenarios, and secure file transfer software simply doesn’t offer these features.
You can use a secure file transfer solution for general-purpose file sharing when security is a priority but collaboration features are not essential. Examples include sending sensitive documents to clients, collaborating on smaller projects with external parties, or securely transferring large files.
Secure File Transfer Software vs Virtual Data Rooms
VDRs and secure file transfer services are valuable tools, but they serve different purposes. Understanding their focus and functionalities helps you choose the right one for your specific file sharing needs, ensuring both security and the collaborative features necessary for your workflow.
If you need more than just a secure file transfer software solution, get in touch with bestCoffer. We offer secure virtual data rooms that can help you secure your next deal.