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. Most application software are very expensive, and both the licensor and the licensee want to protect their technology. 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. 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.
Software is available in two formats, that is, the object code format and source code format. While the licensee gets the object code format, the escrow service providers remain with the source code format. Deposing the source code with the escrow agent ensure that the software is updated and maintained on a regular basis. 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. 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.
On the other hand, source code escrow is also beneficial to the software developer since it protects 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. Both the licensor and the licensee have various obligations which they are required to fulfill. 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.
Besides just storing the source code, escrow agent helps 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. 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.