Secure virtual data rooms: requirements for companies and providers

44 per cent of companies only implement secure data exchange solutions after a security incident has already occurred. This is a key finding of the FTAPI Secure Data Report 2025. Until that point, cross-project collaboration often relies on email attachments, USB sticks, or free file-sharing services. Who holds which version of a document is rarely clear. Who had access to sensitive data often cannot be verified should the need arise.

Virtual data rooms solve this problem: they create a protected, auditable location for sensitive files, which internal and external stakeholders can access in a controlled manner.

In this article, you will learn what sets a virtual data room apart from a virtual project room, which types of providers exist, what requirements data room software must meet, and how to set up your own data room in just a few steps.

TL;DR – the essentials at a glance:

• Definition: A virtual data room (also referred to as an electronic or digital data room) is a protected online environment for storing, sharing, and collaboratively editing sensitive files.

• Distinction: Virtual project rooms are project management tools, primarily used in the construction sector, with a focus on tasks and planning status. Virtual data rooms specialise in security and compliance and serve as protected spaces for exchanging sensitive data.

• Key requirements: End-to-end encryption, granular permission management, audit trail, automatic retention and deletion periods, and a hosting location that ensures digital sovereignty.

• Solution: With FTAPI, you get browser-based, audit-proof data rooms that meet the requirements of GDPR, NIS-2, and TISAX®. Made & hosted in Germany.

What is a virtual data room? Definition

A virtual data room is a protected digital environment in which organisations can securely store, manage, and share confidential files with selected individuals. Documents can be accessed regardless of location or time. The terms electronic data room, digital data room, and online data room all refer to the same concept.

You can also store and share files in a standard cloud storage solution. What distinguishes a data room and makes it suitable for sensitive data are three characteristics that good solutions bring to the table:

• Controlled access: A permissions and roles system determines who may view, download, edit, or delete files. Permissions can be defined per data room, folder, or user.

• Traceability: An audit trail logs every activity in a tamper-proof manner: uploads, downloads, approvals, deletions. In the event of an audit or dispute, you can account for every access.

• Encryption: Data is stored in encrypted form within the data room. With providers that offer end-to-end encryption based on the zero-knowledge principle, even the operator cannot view the contents.

Traceability in particular is a key argument for many organisations: according to the Secure Data Report 2025, 26 per cent of companies see the logging of their data exchange as an important advantage — both for internal oversight and external audits.

From physical to virtual data rooms

The term has its origins in an era when a data room was quite literally a room: during company sales or due diligence processes, confidential documents were kept in a locked space, access was regulated, every visit was recorded, and copies were prohibited.

The virtual data room transfers these control mechanisms into the digital world: access control becomes permissions management, the visitor log becomes the audit trail, and copy restrictions become view-only rights and watermarks. The difference: participants no longer need to travel, and the room is ready within minutes rather than weeks.

💡 Tip: Security doesn't have to be complicated. Find out how to establish secure data rooms without disrupting day-to-day workflows in our article Data security without detours.

Virtual data room or virtual project room: what's the difference?

The terms sound similar, but they describe two distinct software categories with different purposes.

Virtual data rooms specialise in the secure handling of confidential files. Their core functions are encryption, granular access permissions, tamper-proof logging, and retention periods. They are used wherever sensitive data needs to be shared in a controlled manner — in ongoing exchanges with clients, patients, or authorities, as well as for time-limited occasions such as a financial audit.

Virtual project rooms originate from project management and are particularly well established in the construction sector, where they are also referred to as Project Communication Management Systems (PKMS) or Common Data Environments (CDE). Their focus is on project control: managing planning status, assigning tasks, tracking deadlines, and mapping approval workflows. Data security is a basic requirement here, but it is not the core of the software.

For your decision, this means: the key question is not which term appears on a provider's website, but which problem you are trying to solve.

• You need project management — such as task management and plan administration for a construction project? Then you are looking for project management software, and providers of virtual project rooms from the construction sector are the right starting point.

• You need a protected space for project-related collaboration on sensitive files, across departmental and organisational boundaries? Then a virtual data room is the right category. Modern data rooms also cover project collaboration directly: with comments in the file preview, file status tracking, and versioning.

One point worth emphasising: a project management tool is not a substitute for a secure data room. As soon as personal data or other protected information is involved, encryption, access control, and tamper-proof audit logs are mandatory. These requirements are met by the data room category — not the task board.

Your advantages: data room vs. email attachments and file-sharing services

What do you actually gain by moving your data exchange to a virtual data room? A direct comparison with the two most common workarounds illustrates this:

In short: email and file-sharing take files out of your control — a data room keeps them under it. You decide who has access and can demonstrate this at any time. For sending individual sensitive messages, an encrypted email solution remains a sensible choice. However, as soon as multiple parties need access to the same data over an extended period, a data room is more efficient for collaboration thanks to its global accessibility. It also reduces version conflicts, as all documents are stored centrally.

Typical use cases: when does a data room make sense?

Virtual data rooms are used wherever sensitive data crosses organisational boundaries:

• Cross-organisational project work: Share construction plans, CAD data, or engineering drawings with partners, service providers, and clients — without size limits and without uncontrolled copies.

• Board and executive communications: Provide meeting documents and strategic materials in a protected space, rather than distributing them via email.

• Tax advisory and auditing: Provide client documents in a structured format and exchange annual financial statements securely.

• Healthcare: Share findings, MRI images, and case files with external parties in a traceable, data-protection-compliant manner.

• Authorities and public administration: Exchange documents with citizens, agencies, and other authorities while complying with requirements for the processing of social data.

• Due diligence and transactions: Open company documents to reviewers in a controlled manner, with read-only rights and watermarks.

The common thread: in every case, the data room replaces insecure workarounds for secure data exchange. This reduces attack surfaces — a goal that, according to the Secure Data Report 2025, is a key driver for 61 per cent of companies when adopting secure data exchange solutions.

Data room providers at a glance: three types on the market

Anyone searching for data room providers will encounter very different solutions that all use the same term. A useful way to navigate the market is to group them into three types:

• Transaction-specialised data room providers: These solutions are built for one-off, time-limited processes — typically company sales and due diligence reviews. They offer specialist features such as Q&A modules for bidding procedures and often charge per project or data volume. Well suited to a single deal, but generally oversized and costly for ongoing day-to-day use.

• Secure data exchange platforms: Here, the data room is one component of a broader platform, alongside encrypted email, digital forms, or automated data workflows. These solutions are designed for continuous operation: recurring exchange processes, large numbers of internal and external participants, and compliance documentation as part of daily business. FTAPI belongs to this type.

• Generic cloud storage with sharing features: International cloud services offer shared folders and, in some cases, data room-like add-on products. They are optimised for simple sharing; granular permission concepts, tamper-proof audit logs, and automatic retention periods are often not part of the standard offering. With US-based providers, the question of digital sovereignty also arises.

What works in your situation depends on two questions: how long will you be using the data room — as a one-off or on an ongoing basis? And how stringent are your compliance requirements?

The longer the intended use and the more regulated the environment, the more strongly the criteria in the next section point towards a platform solution with a verified security standard.

Selecting data room software: the requirements that matter

The market for data room software is large, and the differences lie in the detail. These are the criteria you should evaluate when choosing a provider:

1. Encryption and the zero-knowledge principle

Transport encryption (TLS) is standard and is not sufficient on its own. Look for end-to-end encryption: data is encrypted by the sender and only decrypted by the authorised recipient. If the provider also operates on the zero-knowledge principle, no one but the authorised users can access the content — including the provider itself.

2. Granular permissions and role management

Examine how precisely access can be controlled. Can you assign permissions per data room, per folder, and per user? Can view-only, download, upload, and editing rights be managed separately? The more granular the system, the more accurately it reflects real project structures.

3. Audit trail and tamper-proof logging

To meet compliance requirements under GDPR, NIS-2, or TISAX®, you must be able to provide a complete record of all access. The software should automatically log who uploaded, viewed, downloaded, or deleted which file and when — and store these logs in a tamper-proof manner.

4. Retention periods and data lifecycle management

GDPR requires that personal data is not stored for longer than necessary. Good data room software implements this automatically: you configure deletion policies per data room, and files are removed automatically once the deadline has passed. A recycle bin protects against accidental data loss.

5. Hosting location and digital sovereignty

Where is your data physically stored, and which legal jurisdiction governs the provider? US-based providers fall under the CLOUD Act, which can allow US authorities to access data under certain conditions, regardless of where the servers are located. Those who want to retain full control should choose a provider with hosting in Germany and a European ownership structure. Certifications such as BSI C5 Type 2 or ISO 27001, 27017, and 27018 make the security standard independently verifiable.

6. Usability for internal and external users

The most secure solution is worthless if employees work around it. Consider: does access work directly in the browser without installation? Can external partners access shared rooms without their own licence? Can files be uploaded via drag and drop? The lower the barrier to entry, the lower the risk of shadow IT.

7. File sizes and scalability

Project work in particular generates large files: videos, CAD models, image data. Clarify in advance whether there are restrictions on file size or storage capacity, how these affect costs, and whether very large files can also be exchanged securely.

Creating a data room: how to proceed

ESetting up a data room with a modern cloud solution takes just a few minutes. The real effort lies in the preparation. These five steps have proven effective:

• Define the purpose and participants: Establish what the data room is for and who needs access. A review room with read-only access requires different rules from an ongoing project collaboration space.

• Set up the structure: Create the data room and define a clear folder structure before the first files are uploaded. A well-thought-out structure saves time spent searching later, prevents misfiling, and simplifies data management.

• Assign roles and permissions: Give each participant the appropriate role. Grant as few permissions as necessary and as many as required. External partners generally receive access only to the folders relevant to them.

• Configure compliance settings: Set retention periods, activate file classification if required (such as "Internal" or "Confidential"), and determine whether sensitive documents should be protected with watermarks.

• Upload files and invite participants: Upload the documents and release the room. From this point on, every activity is automatically recorded.

FTAPI: virtual data rooms made & hosted in Germany

As part of its platform, FTAPI offers virtual data rooms (the FTAPI SecuRooms), which work entirely in the browser — no installation required, including for external participants.

Key features at a glance:

• End-to-end encryption based on the zero-knowledge principle: SecuPass technology encrypts data using AES-256. No one but authorised users can access the contents — not even FTAPI.

• Granular permissions management: Roles and access rights can be defined per data room, folder, and user. Admin reports show at any time who has access to what.

• Tamper-proof audit trail: Every activity is logged automatically, enabling you to meet your documentation obligations under GDPR, NIS-2, and TISAX®.

• Automatic retention periods and recycle bin: Individual deletion policies implement GDPR requirements and prevent data clutter. Accidentally deleted files can be restored from the recycle bin.

• Project-based collaboration: Comments and annotations directly in the file preview, file status, and file classification make the state of work visible. This makes SecuRooms a protected space for cross-organisational project collaboration. With SecuRooms Drive for Windows, you can work directly from File Explorer via drag and drop.

• Files of any size: Even very large files can be stored and shared.

• Digital sovereignty: FTAPI hosts exclusively in certified German data centres. The platform is attested to BSI C5 Type 2 and certified to ISO 27001, 27017, and 27018.

Additional security features include two-factor authentication, single sign-on via SAML, and a premium virus scanner with MIME type checking.

What this looks like in practice is demonstrated by the Steiermärkische Krankenanstaltengesellschaft, which shares highly sensitive data and large files via a centralised, data-protection-compliant solution.

Conclusion: from file chaos to a controlled data room

Virtual data rooms are no longer a specialist tool for individual transactions. They are the secure foundation for any collaboration in which sensitive data crosses organisational boundaries. Those who continue to rely on unencrypted email attachments and free file-sharing services lose control over where their company data ends up — and have nothing to show for it when an audit comes.

Don't wait for the first incident. Review your current data exchange methods against the requirements outlined above and set up your first data room where your most sensitive data is currently flowing unprotected.