The Essentials of Software – 101

Posted on Posted in Business Products & Services

Why Escrow Services are a Necessity

Many companies are now taking advantage of the improved technology to maximize the use of various software solutions. This has necessitated companies to license different software to meet their technological needs. Because of the prohibitive cost of developing application software, licensors and licensees want to ensure that they protect their investments. For this reason, software vendors use escrow services to protect their interests as well as those of the licensee. With source code escrow, the developer is able to store the source code with a third party. The escrow agent is the third party in this case, and he is supposed to impartial so as to ensure the rights of both the licensor and the licensee are guaranteed. Source code escrow is very important and can be initiated by either buyer or the seller of the software application.

Software exists in two formats namely the object code format and the source code format. While the licensee gets the object code format, the escrow service providers remain with the source code format. This ensures the continuity of the software maintenance over time. Doing this also guarantees that any business using a particular software is cushioned against possible losses that arise from poor software maintenance. Source code escrow services protect the business using the application for any event including the bankruptcy of the developer which may terminate some services. Under the escrow agreement, the developer, has the responsibility to maintain and offer support to the licensee based on the agreed terms and if this is not fulfilled, the licensee has the right to acquire the source code.

Source code escrow also benefits the software developer by protecting their intellectual property rights. There are so many people out there who are out to copy the ideas of different developers, and this makes it hard for the developer to surrender the source code to the licensee. Both the developer and the licensee are bound by various terms and conditions clearly outlined in the escrow agreement. Each of the parties in the escrow agreement has obligations to fulfil. Failure to fulfill these obligations there are serious consequences. The use and transfer of the source code is clearly discussed under the escrow agreement.

The other function of the escrow agent is to verify the availability of the source code. There is also the need to ensure that the software is working as it should and thus the escrow agent has to verify this. When the licensee will be using the software for an activity that is vital to the company or has a direct impact on the revenue, it is important to use source code escrow services. If the cost of acquiring the software is very high, the licensee is also advised to make sure that they use an escrow agent.