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. 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. Software escrow involves depositing the source code of the particular application 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. 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. 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. 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.
Source code escrow also benefits the software developer by protecting their intellectual property rights. Due to the high number of software theft, developers are not comfortable with 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. Each of the parties in the escrow agreement has obligations to fulfil. 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.
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. 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.