Brick & Mortar Vs Online Businesses: My Experience

Understanding Source Code Escrow Basics To Protect Your Business Platforms

12 July 2016 by Roy Morris

When you're getting ready to license a major software platform to manage your daily business operations, you need to make sure that your software license is protected. For example, if the company building your platform were to go bankrupt or otherwise out of business in a few years, how would you update your platform? The key is a source code escrow. Under this kind of agreement, the source code for your platform is stored with an independent third party so that you have access to it in the event that the developer is no longer available. Here are a few different types of source code escrow agreements to consider with your developer.  

Three-Party Escrow Agreement

For software developers who don't typically offer a source code escrow for clients, you'd probably end up with a three-party escrow agreement. That means that the only people involved are you, the software developer and the escrow holder. This type of agreement is ideal when the developer doesn't typically provide escrow, because it doesn't require that software escrow be available to all of the clients. It's also a popular option if you're dealing with a custom-designed platform that no other client uses.

Multi-Party Escrow Agreement

A multi-party escrow agreement is another common option. This kind of agreement is usually used when the software vendor licenses the same software to multiple clients and is offering source code protection for all of the licensees. The software developer can list the licensees in the escrow documents to ensure that everyone receiving the platform also gets access to the source code if necessary.

Licensee-Specific Escrow Agreements

If you're licensing more than one software package from different vendors, take the development of the escrow out of the software developer's hands. Work with an escrow company (such as EscrowTech) to establish a licensee escrow where you can hold source code for each of your vendors. This type of escrow system creates individual digital vaults where the software developers can post their code. This gives you greater control over the software packages your company licenses so that you don't have to worry about future development or maintenance.

The software platforms your company relies on are essential parts of the infrastructure. Having a software developer go out of business could leave you struggling for support if you're not prepared in advance. Consider these types of source code escrow agreements for the platforms you're having developed or investing in so that you can be sure you'll always have what you need.  

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