One way businesses try to gain an advantage over their competitors is by using the latest software application technology to automate their business processes. Many companies do this by outsourcing the development of the software application to a software company but this can pose a risk for businesses, especially if the software company isn’t very profitable or established. 

Both the business and the software company are then left in a position where they need to protect their investments, and the way to go about this is to consider a software escrow agreement. In this post, we are going to look at what a software escrow agreement is and the benefits of using a software escrow agent.

What is a software escrow agreement?

To put it simply, a software escrow (source code) is an agreement put in place to help all parties involved. The agreement is between the software developer and the client, and neutral 3rd party source code escrow agents. The escrow agent is trusted to store the source code, any data, and documentation and will only release these materials when a mutual condition has been met. 

A software escrow agreement is often used when a business wants to protect its software in the event that the developer discontinues support for the software, breach the contract they have in place, or if they go out of business. If any of these events occur, then the software escrow agents make the source code and other materials available to the business to allow them to carry on with operations. 

What are the benefits of using a software escrow agent?

It’s essential for both the client and the software company to use an escrow agent as it can lessen the risk of both parties losing out while ensuring their investments are stored and secured safely. The software escrow agent should be reputable and ideally have been in business for a long time.

Using a source code escrow agent also makes negotiations a lot smoother. Another benefit of using an escrow agent is that it helps create a sense of partnership and trust between both parties and can help seal the deal. 

For the developer’s benefit, using an escrow agent can establish credibility if your company is fairly new. This will then put the developer in a better position amongst its competitors. It can also provide the developer with a legal right to update and maintain the software. 

In terms of benefits for the client, the biggest advantage is that should they lose access to the source code and materials which can result in significant disruption to the business, such as productivity, revenue, and safety, then they know that the software escrow agent also has up-to-date versions. This minimizes risk to the overall business. 

To avoid any type of delay when it comes to a software deal, it’s worth considering if a source code escrow agreement is needed. It is beneficial for both the business and the software developer to have one in place, but it’s important to choose the correct software escrow agents.