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. The software tends to be very expensive, and it is important for both the licensor and the licensee to protect their investments. Software vendors use escrow agreements to protect both their interests and those of the licensee. 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.
Software exists in two formats namely the object code format and the source code format. As a licensee, you only get the object code format while the escrow gets the source code for safe keeping. The benefit of doing this is that the licensee is guaranteed the continuity of the software maintenance. 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. 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.
Besides protecting the rights of the licensee, the escrow agreement is key to protecting the intellectual property of the developer. Due to the high number of software theft, developers are not comfortable with 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. 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.
The other function of the escrow agent is to 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. While it is advisable to always use escrow services, those licensees who use the software to support a vital function of the company have more to lose and they should make sure they protect their investments. If the cost of acquiring the software is very high, the licensee is also advised to make sure that they use an escrow agent.