What is Software Escrow and its Benefits

Software and technology are part and parcel of a successful business. As a business unit, you are always likely to enter into software deals with developers.  When such a deal happens, you will want to ensure that the software is available to you in a continued manner. This can be ensured through the execution of a Software Escrow Agreement. Let us understand the concept of Software Escrow and associated benefits in the following paragraphs.

Software Escrow – What is it?

Software Escrow is the process through which the source code of a software application along with the related documentation and data files with a third party Escrow agent. When a deal between a business and a software developer is executed, the need for a software Escrow agent is necessitated during the last stages of software licensing.

It does ensure that the interests of all the stakeholders involved in the software agreement deal are safeguarded. The software escrow agent will hold on to the data until the condition agreed upon in the agreement is reached.

Why is a Software Escrow Needed?

Well, there are several reasons that necessitate a Software Escrow agreement. When a business enters into a deal with a software firm for a software license, it will invariably look for the continued availability of the software along with its proper maintenance. Since a business is spending a heavy price for the software license, it is but natural that the firm will look for a safety for its investment.

A software escrow arrangement will ensure that the software and the updates will be available even if the developer goes out of business, or even sold out or acquired. There are cases when a software vendor fails to meet the obligations stipulated in the deal. A software Escrow would be helpful in such scenarios.

If you are a software developer yourself, the concept does have benefits for you too.  A software source code is your intellectual property. Giving out the source code and the data to the licensee can have the cases of unauthorised usage. The licenses protected through Software Escrow will have an access code and thus does away the possibility of piracy of your software.

The Benefits Of Software Escrow

The benefits will be needed to be analysed both form a vendors’ point of view and a licensees point of view to get a clear understanding of the concept.

If You Are A Licensee

  • You will be ensured of continued use of software.
  • If the concerned software is critical to your day to day operations, a Software Escrow agreement takes care of unneeded crashes in productivity.
  • It ensures your right to legal software.
  • There are no worries associated with the capability of the software vendor.

If You Are A Software Vendor

  • You do not need to part with your source code, thereby protecting your intellectual property rights.
  • You can win the confidence of the licensees by executing a software escrow agreement.
  • You will get a safe custody of your source code. All your documents and data associated will stay with a single escrow agent instead of being scattered among the multiple licensees.
  • You can be assured of better negotiations with your customers.

The Concluding Thoughts

A software escrow arrangement can be the best way to protect your business against the unforeseen shutdowns just because your software vendor is not willing to maintain the software for whatever reasons.

But before choosing a Software Escrow agent, we would advise you to conduct an in house research for the best escrow agent that should protect you with a continued and efficient usage of the software that is critical for the well-being of your business.

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