Advancement in technology has made it very important for companies to take advantage of information technology solutions 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. 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. This third party is known as the escrow agent and should be independent of both the licensor and 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. 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. Under the escrow agreement, the developer, has the responsibility to maintain and offer support to the licensee based on the agreed terms and if this is not fulfilled, the licensee has the right to acquire the source code.
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. The software escrow agreement has various terms and conditions that bind both the developer and the licensee. Both the licensor and the licensee have various obligations which they are required to fulfill. 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.
Apart from storing the source code, the escrow agent has to authenticate the source code. The escrow services also verify that the software is working as it should which is also very important. 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.