While the term Software Escrow, or Source Code Escrow, may be a little unfamiliar to many people who are reading this blog, it actually plays a vital role in the smooth running of many businesses around the world. In simple terms, Software Escrow it used when a company licence a particular software package from a licensee for an agreed fee, with various conditions attached.
In normal circumstances a business might actually purchase the software outright, but for many ongoing software development projects it can prove more beneficial to licence the product rather than buy outright ? thereby ensuring that you have access to the latest versions, updates and support. This is where the vast array of Software Escrow Agents on the market come into play, with a role similar to that of a third party holding payment until the goods are delivered, but with a slightly different twist.
The nightmare scenario for many licence holders would be the licensee going out of business and not being able to access the software which their whole business may depend on. Normally if this were the case then the business would be forced to look at a new package which offered maintenance, backup, etc, but at the very least this would disrupt their business operations. Nowadays the done thing is to engage the services of a Software Escrow Agent who will hold the original source code from the software package which is being licensed.
If certain conditions are breached, for example if the licensee was not carrying out their maintenance duties or errors were going unattended, this could invoke an action such as the release of the original source code to the licence holder. While it would take some time, the possession of the original code would allow problems to be fixed through other third parties if for some reason (e.g. bankruptcy) the originally software coder was not able to help.
This protects the future use of the system by the licence holder and ensures that the licensee would do their best to ensure that the original highly confidential source code was never made public.