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Software Escrow and Your Business

August 11, 2014

A large number of businesses now rely on being connected to the internet, whether it’s having a website up and running, or using innovations like the cloud to communicate with each other. Many also use complex software, from a variety of sources, without really considering what happens when their vendor suffers downtime or a significant issue that requires disaster recovery.
Business continuity is one of the big issues we face today and a service like software escrow could help provide a safety net in the event that something goes wrong.

What is software escrow?

If you run specific software on your website or for your business, the vendor will normally give you access to it to use, but not access to the specific source code. This is fine as long as everything works well, but what happens to the licensee if the licensor either goes out of business or suffers a catastrophic failure? A software escrow is a way of lodging the source code with a neutral third party who can act if there is a problem.

While it is less likely to happen with bigger company software such as that provided by Microsoft, there are still many smaller software suppliers out there, and most businesses have one brand of software attached to their daily functioning that is mission critical.

Software or source code escrows should generally negotiated when you start your first contract with a software company but many businesses are not aware that this vital safety net is even there.

Reasons you need software escrow.

Maintaining business continuity is vital to all companies operating in the online world. Most now utilise disaster recovery measures such as mirror sites that maintain their web presence even when the main server goes down. There are a number of situations when having a software escrow in place for vital programs can be useful:

• The company that provides the software gets into to trouble, laying off staff and reducing its support provisions.
• The software company suffers from its own disaster situation, either an outage or an attack from hackers that makes your system vulnerable and prevents you getting valuable updates.
• The software provider changes the terms of your agreement and fails to provide the service or maintenance that is needed.
• There is a change of provider or the software is discontinued.

When you undertake a software escrow agreement, you need to be sure that it covers all possible eventualities and provides adequate protection in the event of various kinds of failure. But it’s not just those individual businesses that use a particular software that can benefit from this simple protections.

The benefits of a software escrow for the licensee.

Providing a safety net for your potential customers sends out the message that you are a software company that can be trusted. Many businesses are reticent about dealing with small or new software companies simply because of the things that could go wrong in the future. Utilising a third party that can protect your software and make it available if there is a disaster, or you are unable to perform your duties as a vendor, makes sense and helps keep everyone safe.

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written by David Clee

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