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 then means that companies have to license software from various developers. Because of the prohibitive cost of developing application software, licensors and licensees want to ensure that they protect their investments. 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. The licensor only gets the object code format while the developer deposits the source code format with the escrow agent. Deposing the source code with the escrow agent ensure that the software is updated and maintained on a regular basis. This is very important for the licensee since the software may be a key part of their business and this cushions then from possible losses. Source code escrow services protect the business using the application for any event including the bankruptcy of the developer which may terminate some services. Under the escrow agreement, the developer, has the responsibility to maintain and offer support to the licensee based on the agreed terms and if this is not fulfilled, the licensee has the right to acquire the source code.
Besides protecting the rights of the licensee, the escrow agreement is key to protecting the intellectual property of the developer. 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. Both the developer and the licensee are bound by various terms and conditions clearly outlined in the escrow agreement. There are also numerous obligations for both parties. 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.
Apart from storing the source code, the escrow agent has to authenticate 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. 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. Some software is also very expensive which makes it prudent for the licensee to use an escrow service to protect their interests.