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Why Escrow Services are a Necessity

Many companies are now taking advantage of the improved technology to maximize the use of various software solutions. This has necessitated companies to license different software to meet their technological needs. Most application software are very expensive, and both the licensor and the licensee want to protect their technology. For this reason, software vendors use escrow services to protect their interests as well as 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. Source code escrow is very important and can be initiated by either buyer or the seller of the software application.

Software exists in two formats namely the object code format and the source code format. The licensor only gets the object code format while the developer deposits the source code format with the escrow agent. The benefit of doing this is that the licensee is guaranteed the continuity of the software maintenance. 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. 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.

Source code escrow also benefits the software developer by protecting their intellectual property rights. The software industry has so many people who lack the creativity to create something new which discourages the developers from sharing their source code with the licensee. The software escrow agreement has various terms and conditions that bind both the developer and the licensee. There are also numerous obligations for both parties. Failure to fulfill these obligations there are serious consequences. The use and transfer of the source code is clearly discussed under the escrow agreement.

Besides just storing the source code, escrow agent helps verify the availability of the source code. There is also the need to ensure that the software is working as it should and thus the escrow agent has to verify this. When the licensee will be using the software for an activity that is vital to the company or has a direct impact on the revenue, it is important to use source code escrow services. If the cost of acquiring the software is very high, the licensee is also advised to make sure that they use an escrow agent.