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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. With source code escrow, the developer is able to store the source code with a third party. The escrow agent is the third party in this case, and he is supposed to impartial so as to ensure the rights of both the licensor and the licensee are guaranteed. 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.

When software is developed, it is available in either the object code format or the source code format. As a licensee, you only get the object code format while the escrow gets the source code for safe keeping. This ensures the continuity of the software maintenance over time. Doing this also guarantees that any business using a particular software is cushioned against possible losses that arise from poor software maintenance. In the case of bankruptcy of the developer, the escrow agent makes sure that the software keeps running by providing the source code to the licensee. Under the escrow agreement, the developer, has the responsibility to maintain and offer support to the licensee based on the agreed terms and if this is not fulfilled, the licensee has the right to acquire the source code.

On the other hand, source code escrow is also beneficial to the software developer since it protects their intellectual property rights. The software industry has so many people who lack the creativity to create something new which discourages the developers from sharing their source code with the licensee. Source code escrow is anchored on various terms and condition which bind both parties. Each of the parties in the escrow agreement has obligations to fulfil. Failure to fulfill these obligations there are serious consequences. The use and transfer of the source code is clearly discussed under the escrow agreement.

Apart from storing the source code, the escrow agent has to authenticate the source code. The escrow services also verify that the software is working as it should which is also very important. When the licensee will be using the software for an activity that is vital to the company or has a direct impact on the revenue, it is important to use source code escrow services. Some software is also very expensive which makes it prudent for the licensee to use an escrow service to protect their interests.

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