When should I use a software escrow provider? | Receiver London

Software escrow has been around for a number of years now, but we still come across companies that are hesitant to invest in a software escrow agreement. If that sounds like you, this article will help you decide when you should consider using a software escrow provider. Covering what software escrow is, what the most common release terms are, and what types of software escrow agreements are available to you.

Software Escrow – What is it?

Software escrow is commonly used by companies to protect their source code or investment. Escrow services are often requested by developers when their client requests source code or data protection. This requirement is often stipulated in the software license agreement between the developer and the customer.

On top of that, large enterprises as well as SMBs are starting to look into Software as a Service (SaaS) escrow solutions. According to Bettercloud, global spending on SaaS and cloud services continues to rise and it is estimated that by 2025, 85% of business applications will be SaaS-based. However, 56% of enterprise apps are unmanaged, meaning no one pays close attention to things like renewal dates, licensing, app usage, security, and compliance. (Productive)

This is where a software escrow provider can help. By investing in a software/SaaS escrow agreement, these companies are able to protect their data that resides in third-party hosted SaaS applications, protect against data loss, and ensure application continuity. hosted SaaS in the event of a catastrophic failure. by the developer.

What are the most common release conditions?

Software escrow agreements are put in place to reassure the end user that if the software developer is unable or unwilling to support the software, source code and other deposit can be communicated to it and commercial operations can continue normally. The release terms outlined in a software/SaaS escrow agreement typically include the following and can be negotiated between the parties:

  • Insolvency – The state of being unable to pay debts
  • Bankruptcy – Declared legally unable to pay debts
  • Termination of software application support or service
  • Failure to support the Licensed Product to Licensee and failure to cure such material breach within 10 days of notice
  • Transfer of intellectual property rights to a third party that does not provide the same level of protection as provided in the escrow agreement

If a release condition occurs, Recipient may request the Escrow Software Provider to release the Escrow Materials, including Source Code. The depositor has the opportunity to challenge such release condition and, if necessary, the dispute may be submitted to arbitration.

Different Types of Software Escrow Agreements

A range of software escrow agreements suitable for each type of license agreement are available in the market today. The most common include:

  • SaaS security deposit – This software escrow agreement is used when the application is a SaaS hosted in AWS, Azure, GCP or a data center. This agreement protects both the cloud environment and customer data.
  • Single beneficiary – This software escrow agreement is composed of the depositor, the beneficiary and the software escrow provider as an independent third party. A software escrow agreement of this type is typically used when a customer licenses software from a developer.
  • Multiple beneficiary – Multi-beneficiary agreements are used by a developer to reassure their customers that they have a permanent software escrow agreement in place. By having this type of agreement in place, under a single agreement, the promoter is able to add an unlimited number of beneficiaries to the master agreement.
  • Data retention agreements – Data retention agreements are used when a company hires a developer to build a bespoke application and the recipient owns the intellectual property. This type of agreement provides protection for the customer that in the event of a dispute with the developer during the project, another developer will then have the code to continue the project and avoid serious delays.

Conclusion

In summary, there is never a quick yes/no answer when you should use a software provider, you will always have to do your research first. To help, there are a few things you can do to ensure that using a software escrow provider is best for you and your business. If you have doubts that the software vendor is not financially stable, concerned that they may discontinue software service and support, or meet maintenance or support obligations, then the use of a escrow software provider would be required.