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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. As a result, companies have been licensing software from different developers. Most application software are very expensive, and both the licensor and the licensee want to protect their technology. Software vendors use escrow agreements to protect both their interests and those of the licensee. Software escrow involves depositing the source code of the particular application with a third party. This third party is known as the escrow agent and should be independent of both the licensor and the licensee. Indeed, the source code escrow is a very important part of vendor agreement, and both the licensor and licensee have the right to initiate it.

Software is available in two formats, that is, the object code format and source code format. As a licensee, you only get the object code format while the escrow gets the source code for safe keeping. This ensures the continuity of the software maintenance over time. 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.

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. Both the licensor and the licensee have various obligations which they are required to fulfill. Failure to fulfill these obligations there are serious 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. 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. Some software is also very expensive which makes it prudent for the licensee to use an escrow service to protect their interests.