Practical and Helpful Tips: Companies

Maximising the Advantages of Escrow Services

Many companies are now taking advantage of the improved technology to maximize the use of various software solutions. 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 third party is identified as the escrow agent and should have no ties to either the licensor or the licensee. Either the buyer or software vendor can introduce the escrow agreement to protect their interests.

Software exists in two formats namely the object code format and the source code format. The licensor only gets the object code format while the developer deposits the source code format with the escrow agent. This ensures the continuity of the software maintenance over time. 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. 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.

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. 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. Failure to fulfill these obligations there are serious consequences. These consequences relate to the possible use and transfer of the source code which promotes the rights of both parties.

Besides just storing the source code, escrow agent helps 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.

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