5 Lessons Learned: Programs


Why Escrow Services are a Necessity

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. Because of the prohibitive cost of developing application software, licensors and licensees want to ensure that they protect their investments. 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 escrow agent is the third party in this case, and he is supposed to impartial so as to ensure the rights of both the licensor and the licensee are guaranteed. Indeed, the source code escrow is a very important part of vendor agreement, and both the licensor and licensee have the right to initiate it.

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. 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. 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.

On the other hand, source code escrow is also beneficial to the software developer since it protects their intellectual property rights. There are so many people out there who are out to copy the ideas of different developers, and this makes it hard for the developer to surrender the source code to the licensee. Source code escrow is anchored on various terms and condition which bind both parties. 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.

Apart from storing the source code, the escrow agent has to authenticate the source code. There is also the need to ensure that the software is working as it should and thus the escrow agent has to verify this. 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.

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