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Posted on Posted in Business Products & Services

Why Escrow Services are a Necessity

Advancement in technology has made it very important for companies to take advantage of information technology solutions to improve business processes. As a result, companies have been licensing software from different developers. The software tends to be very expensive, and it is important for both the licensor and the licensee to protect their investments. As such, escrow services have been very critical for software developers because the help protect the interests of both parties. With source code escrow, the developer is able to store the source code with a third party. The third party is identified as the escrow agent and should have no ties to either the licensor or the licensee. 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. 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. Source code escrow services protect the business using the application for any event including the bankruptcy of the developer which may terminate some services. The escrow agreement ensure that the licensee has the right to the source code in case the developer fails to fulfill his obligations as per the escrow agreement.

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. Both the developer and the licensee are bound by various terms and conditions clearly outlined in the escrow agreement. Both the licensor and the licensee have various obligations which they are required to fulfill. When one of the parties fails to meet their obligations as stated in the agreement, various penalties apply. 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. The escrow services also verify that the software is working as it should which is also very important. 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. Also, when the price of the software is very high, it is only best to protect the investment with the use of an escrow service.