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Why Escrow Services are a Necessity

Advancement in technology has made it very important for companies to take advantage of information technology solutions to improve business processes. As a result, companies have been licensing software from different developers. The software tends to be very expensive, and it is important for both the licensor and the licensee to protect their investments. Software vendors use escrow agreements to protect both their interests and those of the licensee. A software escrow service involves using a third party to store the source code of a particular application software. 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 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 allows the business to cushion itself against losses that may arise from poorly maintained software. 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. Due to the high number of software theft, developers are not comfortable with sharing their source code with 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. Also, when the price of the software is very high, it is only best to protect the investment with the use of an escrow service.