A Beginners Guide To Companies

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. Because of the prohibitive cost of developing application software, licensors and licensees want to ensure that they 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. Either the buyer or software vendor can introduce the escrow agreement to protect their interests.

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. This ensures the continuity of the software maintenance over time. Doing this also guarantees that any business using a particular software is cushioned against possible losses that arise from poor software maintenance. 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. 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. Each of the parties in the escrow agreement has obligations to fulfil. Failure to fulfill these obligations there are serious consequences. 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. There is also the need to ensure that the software is working as it should and thus the escrow agent has to verify this. 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. 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.

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