The Key Elements of Great Options

Why Escrow Services are a Necessity

Many companies are now taking advantage of the improved technology to maximize the use of various software solutions. As a result, companies have been licensing software from different developers. Most application software are very expensive, and both the licensor and the licensee want to protect their technology. 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. This third party is known as the escrow agent and should be independent of both the licensor and the licensee. Either the buyer or software vendor can introduce the escrow agreement to protect their interests.

Software is available in two formats, that is, the object code format and source code format. The licensor only gets the object code format while the developer deposits the source code format with the escrow agent. The benefit of doing this is that the licensee is guaranteed the continuity of the software maintenance. This allows the business to cushion itself against losses that may arise from poorly maintained software. 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.

On the other hand, source code escrow is also beneficial to the software developer since it protects 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. 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 source code escrow agreement outlines possible use or transfer of the source code which is key in protecting the rights of both parties.

Besides just storing the source code, escrow agent helps 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. 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.

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