With the growth of technology, it has become extremely important for companies to take advantage of various software to improve business processes. This then means that companies have to license software from various developers. Most application software are very expensive, and both the licensor and the licensee want to protect their technology. Software vendors use escrow agreements to protect both their interests and 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.
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 allows the business to cushion itself against losses that may arise from poorly maintained software. Source code escrow services protect the business using the application for any event including the bankruptcy of the developer which may terminate some services. 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. Both the licensor and the licensee have various obligations which they are required to fulfill. 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. 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. 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. Some software is also very expensive which makes it prudent for the licensee to use an escrow service to protect their interests.