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. The software tends to be very expensive, and it is important for both the licensor and the licensee to protect their investments. For this reason, software vendors use escrow services to protect their interests as well as those of the licensee. 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. 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. As a licensee, you only get the object code format while the escrow gets the source code for safe keeping. The benefit of doing this is that the licensee is guaranteed the continuity of the software maintenance. Doing this also guarantees that any business using a particular software is cushioned against possible losses that arise from poor software maintenance. Escrow services are very important because they protect the businesses from the bankruptcy of the developer by ensuring that the source code is available for updates and routine maintenance. With escrow services failure to provide maintenance or support as per the agreement gives the escrow service the right to surrender the source code to the licensee.
Source code escrow also benefits the software developer by protecting their intellectual property rights. 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. The software escrow agreement has various terms and conditions that bind both the developer and the licensee. Each of the parties in the escrow agreement has obligations to fulfil. If any of the parties fails to observe these agreements, there are certain 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. The escrow services also verify that the software is working as it should which is also very important. It is always advisable for a licensee to use escrow services if the software supports a vital function of the organization or has a direct impact on the revenue. 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.