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Why Escrow Services are a Necessity

Many companies are now taking advantage of the improved technology to maximize the use of various software solutions. This then means that companies have to license software from various 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 exists in two formats namely the object code format and the source code format. While the licensee gets the object code format, the escrow service providers remain with the source code format. The benefit of doing this is that the licensee is guaranteed the continuity of the software maintenance. Doing this also guarantees that any business using a particular software is cushioned against possible losses that arise from poor software maintenance. 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. There are also numerous obligations for both parties. When one of the parties fails to meet their obligations as stated in the agreement, various penalties apply. These consequences relate to the possible use and transfer of the source code which promotes the rights of both parties.

The other function of the escrow agent is to 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. If the cost of acquiring the software is very high, the licensee is also advised to make sure that they use an escrow agent.

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