Why Escrow Services are a Necessity

Advancement in technology has made it very important for companies to take advantage of information technology solutions to improve business processes. As a result, companies have been licensing software from different developers. Because of the prohibitive cost of developing application software, licensors and licensees want to ensure that they protect their investments. As such, escrow services have been very critical for software developers because the help protect the interests of both parties. Software escrow involves depositing the source code of the particular application with a third party. The third party is identified as the escrow agent and should have no ties to either the licensor or the licensee. Indeed, the source code escrow is a very important part of vendor agreement, and both the licensor and licensee have the right to initiate it.

When software is developed, it is available in either the object code format or 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. 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. 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.

Besides protecting the rights of the licensee, the escrow agreement is key to protecting the intellectual property of the developer. 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. There are also numerous obligations for both parties. Failure to fulfill these obligations there are serious consequences. These consequences relate to the possible use and transfer of the source code which promotes 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. While it is advisable to always use escrow services, those licensees who use the software to support a vital function of the company have more to lose and they should make sure they protect their investments. If the cost of acquiring the software is very high, the licensee is also advised to make sure that they use an escrow agent.