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Maximising the Advantages of Escrow Services

Many companies are now taking advantage of the improved technology to maximize the use of various software solutions. This then means that companies have to license software from various developers. Because of the prohibitive cost of developing application software, licensors and licensees want to ensure that they protect their investments. For this reason, software vendors use escrow services to protect their interests as well as those of the licensee. 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.

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. This ensures the continuity of the software maintenance over time. This allows the business to cushion itself against losses that may arise from poorly maintained software. 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.

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. 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. The use and transfer of the source code is clearly discussed under the escrow agreement.

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. 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. Some software is also very expensive which makes it prudent for the licensee to use an escrow service to protect their interests.