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Why Escrow Services are a Necessity

With the growth of technology, it has become extremely important for companies to take advantage of various software to improve business processes. This has necessitated companies to license different software to meet their technological needs. 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. A software escrow service involves using a third party to store the source code of a particular application software. The escrow agent is the third party in this case, and he is supposed to impartial so as to ensure the rights of both the licensor and the licensee are guaranteed. Source code escrow is very important and can be initiated by either buyer or the seller of the software application.

Software is available in two formats, that is, the object code format and source code format. The licensor only gets the object code format while the developer deposits the source code format with the escrow agent. 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. In the case of bankruptcy of the developer, the escrow agent makes sure that the software keeps running by providing the source code to the licensee. 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.

On the other hand, source code escrow is also beneficial to the software developer since it protects their intellectual property rights. There are so many people out there who are out to copy the ideas of different developers, and this makes it hard for the developer to surrender the source code to the licensee. Source code escrow is anchored on various terms and condition which bind both parties. Each of the parties in the escrow agreement has obligations to fulfil. If any of the parties fails to observe these agreements, there are certain consequences. These consequences relate to the possible use and transfer of the source code which promotes 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. 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.