Business 101: Protecting your Business Against Unexpected Software Failure

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If you are a business owner, chances are that you depend on other software vendors to computerize a lot of your business requirements. From CRM to invoice generation to employee management a lot of what a business does every day is dependent on individual software.


A lot of this software have become part and parcel of how we do business these days. Another trend that we should look at in the tech world of today is that a lot of these small startups either go bankrupt very soon or they are acquired by bigger companies if they perform really well. So the one being left in the lurch would be you and your business

When we see that this seems like a trend in the business, what can we do to fix it?  That’s when the usage of software escrows will help you. They are like insurance for your business if any of the software service providers that you use goes bankrupt.

They are not automatic in the sense that, you have to take an extra step to include software escrows in your agreement with the software vendor and make sure that your business is protected against unexpected things in the future and is not jeopardized.
Online escrows are not very different from offline escrows. According to Wikipedia,

Source code escrow is the deposit of the source code of software with a third party escrow agent. Escrow is typically requested by a party licensing software (the licensee), to ensure maintenance of the software instead of abandonment or orphaning. The software source code is released to the licensee if the licensor files for bankruptcy or otherwise fails to maintain and update the software as promised in the software license agreement.

As the continued operation and maintenance of custom software is critical to many companies, they usually desire to make sure that it continues even if the licensor becomes unable to do so, such as because of bankruptcy. This is most easily achieved by obtaining a copy of the up-to-date source code. The licensor, however, will often be unwilling to agree to this, as the source code will generally represent one of their most closely guarded trade secrets.

As a solution to this conflict of interest, source code escrow ensures that the licensee obtains access to the source code only when the maintenance of the software cannot otherwise be assured, as defined in contractually agreed-upon conditions.

One of the first software escrow companies to be licensed was EscrowTech. Age of a provider is one of the important factors that talk about their credibility as a service provider. You can check when a company was incorporated by going to the state’s website. For example, EscrowTech’s registration can be found on Utah’s website.

So, how does a software escrow work? Software escrows work in a similar way to that of other offline and online escrows. A software escrow is a neutral third party vendor, who will be storing the source code and other related materials like support and documentation of the software that is being licensed in a very safe location.

When a mutually agreed upon event between the two stakeholders, the software vendor and the business arrives, say for example the software vendor becomes bankrupt, then the software escrow will take the responsibility to provide the access to the business along with other material like support and documentation that was protected to the business, that is the software license.

By this, the business is protected from unexpected situations which cannot be predicted ahead of time and helps them keep the software running further or at least till they can take the necessary steps to change to an alternative software that gets their job done. Using a software escrow will protect your business against uncertainties and helps you make sure that your business stays afloat.

It is also very crucial for the software vendor as it is a matter of ethics and hence improves the trust and relationship between the software vendor and the software licensee. All this without placing the vendor’s first and foremost asset, the software code, under the hands of the licensee. The software escrow makes sure that the code is safe and intact until the mutually agreed upon event arrives.

If you are a software vendor, take the necessary steps to incorporate a third party software escrow as part of your agreements with businesses as it improves your standing amongst your peers.

If you are a business then make sure a software escrow is part of your agreement with the vendor to provide your business that little added protection during times of need.

I hope this article was helpful to you and your business in understanding the importance of future proofing it using strategies like software escrows. Always think ahead of the curve and make sure that you are taking the necessary steps in all fronts with regard to your business.


Vishal Gaikar

Article by Vishal

Meet Vishal Gaikar, the tech wizard hailing from Pune, India, who's on a mission to decode the digital universe one blog post at a time. When he's not tinkering with gadgets or diving deep into the digital realm, you can find him concocting the perfect cup of chai or plotting his next adventure. Follow his tech escapades on Twitter and buckle up for a wild ride through the world of innovation and geekery!

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