Most users use escrow software to ensure protection, backup, license tracking and management. However, you should evaluate whether or not to use this system because, sometimes, other security alternatives are preferred.
The service of a software escrow agent was born to help protect the people involved in a transaction; it refers to a neutral escrow agent, which must be external to the objectives and needs of the operation, who is responsible for retaining the data, the source code, and the relevant documentation. The agent keeps this information until both parties agree on the transaction.
What is the source code escrow meaning?
Let’s start by talking a bit about source code escrow. In this case, it refers to the intermediary agreement between a software provider and a specific client to guarantee to both parties the maintenance of the software of some application and the system or platform of software, despite the changes it may go through in the process.
Thus, the supplier shares the source code with the code escrow system.
It was born from the desire of customers to ensure guarantees on the proper maintenance of the software services negotiated with the supplier.
The software provider, not wanting to share or sell copies of the software source code due to issues such as intellectual property or proprietary software development considerations, came up with the idea of source code escrow through an intermediary.
Thanks to source code escrow, a practical compromise is generated, allowing the customer to make the changes that suit their needs, but assuring the supplier that the software source code will not be made public, nor will it be duplicated to later use the intellectual property as their own.
From the customer’s point of view, the custody of the source code works as a guarantee that their investment for a software system is in place and only the customer participates in it, thus protecting both parties, the vendor’s intellectual property and the customer’s exclusive performance.
Is source code escrow important?
The short answer is yes. Source code escrow creates a truce between both sides of the business, benefiting both. The location of the escrow account is secure; it can be offline or stored in a secure cloud. Upon any contract release condition, the agent escrowing the source code will release the copy only to the seller.
In turn, the buyer may ask the question: “what happens to my business if the software vendor goes bankrupt or closes down?”. In that case, with the source code escrow agent in place, the customer can be assured that his software will not simply stop working out of the blue.
This protects the vendor’s interests and allows the customer to maintain operations if the software vendor can no longer operate.
For this reason, it is important to use a source code escrow agent. It creates security from both the seller’s and buyer’s perspectives. In addition, there are different types of source code escrow according to the type of customer or business.
SaaS Escrow Agreement
This type of agreement is used when the application uses software as a service (Software as a service or SaaS) used on Amazon Web Services (AWS), Microsoft Azure, Google Cloud Platform (GCP) and other data centre.
Thanks to this escrow, customer data and information in the cloud are protected. Typically, the provider escrows the source code and the company’s scripts and databases.
Multi Beneficiary Source Code Escrow Agreement
The multi-beneficiary source code escrow agreement refers to the agreement where the software developer guarantees that the customer gets the escrow agent permanently.
With the multi-beneficiary agreement, the supplier can add as many beneficiaries as he considers to the official agreement without having to limit the number.
Single Beneficiary Source Code Escrow Agreement
Formed between the provider and the beneficiary, the escrow agent functions as an independent third party. This is the agreement typically used when a customer wants a license to use a developer’s or vendor’s software.
Data Holding Agreements
This type of agreement generates more freedom for the customer since the supplier develops a software for some application specifically for the beneficiary, and the beneficiary becomes the intellectual owner of the property, i.e. the software.