Are enterprise file-sharing solutions the same as virtual data rooms?

The post-COVID rise in remote working only strengthened businesses’ reliance on enterprise file sharing (EFS) and syncing. Such solutions provide a unified platform for stakeholders to share files and collaborate regardless of users’ location. 

However, data security remains a top concern amidst the rising cost of data breaches. In 2024, the average cost of a data breach reached $4.88 million — a 10% increase YOY and the highest amount yet. 

Are enterprise file-sharing solutions sufficient to maintain data security in this increasingly remote world? What are their typical use cases, and how do they differ from virtual data rooms (VDRs)?

What is enterprise file sharing and what it’s used for?

Enterprise file-sharing or enterprise file sync and sharing, refers to a combination of secure file storage and sharing with stakeholders within an organization to allow for collaboration. 

This is realized through a set of software solutions and technologies that allow organizations to store, share, and collaborate on files internally and externally. There are six main types of EFS (see below) but in general, they fall into three, main categories:  cloud-based, on-premise, or hybrid. Regardless of solution type, however, the data always remains in the company’s data repository.

EFS solutions are like a digital office where stakeholders can store, send, and work on documents together, no matter where they are, and they also include back-end synchronization, ensuring that data stays updated across all devices. 

Enterprise filing solutions sound complex, but in reality, the main providers are well-known, easily accessible, and familiar packages: Google Drive, Microsoft OneDrive, and Dropbox are all EFS.

Enterprise file-sharing platforms are typically used for:

• Team collaboration
  Enables employees to work on the same files simultaneously, ensuring everyone stays aligned and productive. With EFS solutions, users can typically edit documents and leave comments in real-time, making teamwork smoother and faster.
• Secure file sharing
  Provides safe cloud storage to share sensitive data with clients, partners, or vendors. Security features like encryption, two-factor authentication, and access controls ensure files are only accessible to authorized people.
• Data loss prevention
  Data backup automatically stores copies of important files to avoid data loss and mitigate the risk of hardware failures or cyberattacks. This ensures that businesses can recover their data quickly if needed.
• Remote work support
  Allows employees to access, share, and work on files from anywhere, using any device. This boosts productivity for remote teams and supports flexible work arrangements.
• Compliance with regulations
  Ensures that sensitive data is stored and shared in line with legal and industry standards, such as the General Data Protection Regulation (GDPR) or Health Insurance Portability and Accountability Act (HIPAA). Secure enterprise file-sharing solutions help businesses avoid fines and maintain customer trust.
• File version control
  Keeps track of all changes made to files and allows users to restore previous versions if needed. This minimizes errors and ensures teams always work with the latest updates.
• Workflow automation
  Streamlines processes like approvals, file distribution, and notifications. A secure file-sharing platform saves time and improves efficiency across teams by reducing manual tasks.

Types of EFS

There are six main types of enterprise file sharing: 

Main risks associated with EFS

While a reliable platform for data sharing and stakeholder collaboration, EFS solutions can also pose certain risks to a business:

• Data breaches
  Sensitive files can be stolen or accessed by the wrong people if the system isn’t secure. Sharing a financial report using an unprotected link might allow hackers to steal data. This can cause financial loss and harm the company’s reputation. An example is the recent breach of Fortinet customer data that was stored on a third-party file-sharing service.
• Human error
  People often make mistakes — 31% of cloud data breaches happen because of human error. For example, a stakeholder might unintentionally send a confidential file to the wrong email address. This can result in data loss, exposure of sensitive information, or a delay in operations.
• Identity theft
  Hackers can steal login credentials and impersonate employees to access sensitive files. For instance, if an employee becomes a victim of a phishing scam, an attacker could use their credentials to download files that are confidential.
• Malware attacks
  Hackers can attach malware to shared files, which can infect company systems when downloaded. For example, an employee might open a shared file containing a ransomware program that allows hackers to lock critical company data until a payment is made.
• Shadow IT
  Employees might use unauthorized apps or personal accounts for sharing files, bypassing company-approved tools, known as ‘Shadow IT’. For instance, someone might upload a sensitive report to their personal cloud storage to work remotely, which may lack the required security. This creates vulnerabilities and makes it harder for IT teams to manage risk.
• Insider threats
  Employees may intentionally or accidentally misuse company data. For example, an unsatisfied employee might download and share trade secrets with a competitor, or someone could mistakenly share sensitive files with the wrong external users.

The core capabilities of EFS apps

Let’s take a look at the key features EFS solutions typically offer.

• Centralized file storage
  Enterprise file-sharing apps store all files in one central location, making it easy for stakeholders to access and manage documents. A central hub makes sure that everyone has the most up-to-date version of files, reducing the potential for confusion and duplication.
• Access controls
  EFS cloud storage solutions allow administrators to set detailed access controls, determining who can view, edit, or share files. By using permissions, sensitive information is protected, and only authorized users can access specific documents.
• File synchronization
  EFS cloud storage providers can sync files across multiple devices in real time. Whether you’re on a desktop, laptop, or mobile device, you’ll always have access to the latest version of your files. This ensures stakeholders can work on documents from anywhere without worrying about outdated files.
• Collaboration tools
  Many apps offer built-in tools for team collaboration, such as document commenting, version tracking, or simultaneous editing which can improve teamwork and productivity.
• Cross-platform compatibility
  Enterprise file-sharing apps often work across different operating systems such as Windows, Mac, Linux, iOS, or Android. They also ensure both desktop and mobile access. This ensures that stakeholders can share and access files on whichever device or platform they use.
• Audit trails and activity logs
  EFS apps keep a record of who accessed, edited, or shared files and when. This audit trail provides visibility into user activity, making it easier to track changes and detect potential security issues. It also helps to adhere to all security and compliance requirements, by logging all actions.
• Offline access
  Some enterprise file-sharing platforms provide offline access, allowing users to view and edit files even when there’s no internet. Once back online, the changes are automatically synced.
• Automated backup and recovery
  Automatic backup features help protect against data loss. Files are backed up regularly, and in case of accidental deletion or corruption, they can be easily restored.
• Data security
  EFS solutions offer a variety of security features such as two-factor authentication, end-to-end encryption, expiration dates for shared links, and single sign-on. This way, they protect the data from unauthorized access. However, EFS protections are not as advanced as virtual data room security, and so might be unsuitable for complex industries like finance or government.
• Support for unique file extensions and large file transfers
  EFS apps are designed to handle specialized file types (for example, CAD drawings or multimedia files) and support the sending of large files with automated file transfers. This is essential for industries like design, engineering, or media production, where traditional sharing methods may not work. 

Enterprise file sharing versus VDR: main differences

On the surface, private enterprise file sync and share solutions and virtual data rooms might seem similar when it comes to data storage and sharing. However, there are certain critical differences: 

If you’re looking for a reliable file-sharing and storage solution to facilitate workflows, choose EFS apps. However, if you need secure storage for confidential data to use during complex financial transactions like mergers and acquisitions, a virtual data room is the better choice. 

Key takeaways

• Enterprise file-sharing solutions (EFS) allow organizations to store, share, and collaborate on files on a single platform.
• EFS apps can be cloud-based, on-premise, hybrid, P2P, FTP, and MFT.
• Enterprise file-sharing solutions are used for team collaboration, workflow automation, secure file sharing, or data backup.
• EFS services can open businesses up to certain risks, such as data breaches, malware attacks, human errors, shadow IT, and more. This means they’re not 100% suitable for complex industries like banking, finance, or government.
• Virtual data rooms are designed to support businesses involved in complex transactions like M&A, particularly when it comes to confidential data sharing and storing.

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