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. Most application software are very expensive, and both the licensor and the licensee want to protect their technology. 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. This third party is known as the escrow agent and should be independent of both the licensor and the licensee. Source code escrow is very important and can be initiated by either buyer or the seller of the software application.
Software is available in two formats, that is, the object code format and source code format. While the licensee gets the object code format, the escrow service providers remain with the source code format. Deposing the source code with the escrow agent ensure that the software is updated and maintained on a regular basis. This allows the business to cushion itself against losses that may arise from poorly maintained software. 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.
On the other hand, source code escrow is also beneficial to the software developer since it protects their intellectual property rights. Due to the high number of software theft, developers are not comfortable with sharing their source code with the licensee. Source code escrow is anchored on various terms and condition which bind both parties. 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 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. It is also the role of the escrow service to ensure that the software is in good shape and that it offers optimal performance to the licensee. 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.