With the growth of technology, it has become extremely important for companies to take advantage of various software to improve business processes. 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. 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. 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. This ensures the continuity of the software maintenance over time. 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. 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.
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. 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. These consequences relate to the possible use and transfer of the source code which promotes the rights of both parties.
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. 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. If the cost of acquiring the software is very high, the licensee is also advised to make sure that they use an escrow agent.