Valuable Lessons I’ve Learned About Software

Why Escrow Services are a Necessity

With the growth of technology, it has become extremely important for companies to take advantage of various software to improve business processes. As a result, companies have been licensing software from different developers. Most application software are very expensive, and both the licensor and the licensee want to protect their technology. Software vendors use escrow agreements to protect both their interests and those of the licensee. A software escrow service involves using a third party to store the source code of a particular application software. The third party is identified as the escrow agent and should have no ties to either the licensor or the licensee. Either the buyer or software vendor can introduce the escrow agreement to protect their interests.

When software is developed, it is available in either the object code format or the source code format. The licensor only gets the object code format while the developer deposits the source code format with the escrow agent. The benefit of doing this is that the licensee is guaranteed the continuity of the software maintenance. This is very important for the licensee since the software may be a key part of their business and this cushions then from possible losses. In the case of bankruptcy of the developer, the escrow agent makes sure that the software keeps running by providing the source code to the licensee. The escrow agreement ensure that the licensee has the right to the source code in case the developer fails to fulfill his obligations as per the escrow agreement.

Besides protecting the rights of the licensee, the escrow agreement is key to protecting the intellectual property of the developer. The software industry has so many people who lack the creativity to create something new which discourages the developers from sharing their source code with 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. When one of the parties fails to meet their obligations as stated in the agreement, various penalties apply. The source code escrow agreement outlines possible use or transfer of the source code which is key in protecting the rights of both parties.

Apart from storing the source code, the escrow agent has to authenticate 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. Also, when the price of the software is very high, it is only best to protect the investment with the use of an escrow service.