It’s a fair enough question for business owners and software developers alike. But first, what does Software escrow mean? Think about it this way. You hope your household doesn’t ever get damaged in a natural disaster or that you’ll never be in an accident and hospitalized, but you have insurance to give you peace of mind anyway. It helps to think of technology or “source-code” escrow just like insurance: you hope you never have to use it, but you want to be sure it’s there when you need it – and that it works. But first, let’s start from the top… 

 What is the Purpose of Source Code Escrow?

Today, enterprises all around the world license and implement custom software applications that are critical to the success of their daily operations. This kind of data, IP or IT development and implementation can cost millions in investment. Software escrow is a service that helps protect all parties involved in a software licensing agreement. This is done by having a neutral, 3rd-party escrow agent hold source code, data, and documentation until a mutually-agreed-upon event occurs for its release.

 What Are Software Escrow Agreement Release Conditions?

These can be any number of factors that may affect business continuity. For example insolvency, bankruptcy, discontinuing support or service of the software application. It could also be the failure to support the product that is licensed to the beneficiary and then failing to cure such a material breach within 10 days of notice. Similarly, this could also be in the event that there is a transfer of IP rights to a third party who does not provide the same level of protection provided for in the original escrow agreement.

Following a release event, the promise of a source code escrow is that you can obtain the code to maintain the software your enterprise requires without the original developer or programmer. This maintenance may involve fixing bugs, ensuring compatibility with other system upgrades and adding functionalities required in your evolving business landscape.

Source-Code Escrow For Businesses

Historically, most software escrow arrangements were passive in their approach to the deposited material. Consequently, passive custodians (such as banks, notaries, legal firms) would physically `hold` a copy of the software source code as a deposit. However, they would be unable to technically verify that the deposit is the `correct` or `up-to-date` version. Most importantly, they would be unable to confirm that the deposited material is complete. Today, the market for licensed software products, and Software as a Service (SaaS), is far more discerning when it comes to business continuity and operational risk.

Software Escrow Agreements in South Africa

Ultimately, if the customer has no assurance that the software developer will always be around to perform software maintenance, and such maintenance cannot be performed without the source code, software escrow is now considered a necessary part of South African business deals.

In fact, the King Governance protocols state that the “availability of the functioning of the system, possession of the system, authenticity of system information and the assurance that the system is usable and useful” must be safeguarded in South Africa.

After all, this business risk needs to be mitigated in order to protect the continuity of your day-to-day business operations. If your software supplier fails, without access to the source code of the software, you will not be able to update or maintain your product.

The Best Software Escrow Services Guarantee You Peace of Mind

A professional escrow service provider actively tests and audits the material on deposit to consistent standards of technical verification on a regular basis. The verification report confirms that the deposit contains what the supplier has committed to place in escrow. This provides proper reassurance that the software deposit is complete, up-to-date and usable in the event of an emergency. This is active escrow at work safeguarding the continuing operation of your business’s IT platforms and products. 

Source Code Escrow For Developers 

With your software in escrow, any software supplier can run on to the same field as the world’s biggest software companies. This is because your code is secured for the benefit of your corporate clients. World-class software providers have come to recognize that data protection through software escrow is a stamp of quality – one that has become an industry standard.
Software Escrow also provides a configuration benchmark for your software, which is irrefutable proof of copyright and intellectual property ownership. It’s also been known to shorten sales cycles and ultimately represents a significant advantage to your development value proposition. Best of all, the risk of permanent loss of critical intellectual property (IP) is eliminated with a copy of your IP stored off-site in a secure vaulting facility, readily available in an emergency.

So, is Software Escrow Worth It?

Ultimately, the decision to place code in escrow is just the start of source code negotiations, not the end. The devil really is in the detail and the parties need to specifically think about clear rules for the release of the code being held. Clear rules will ensure that the specific needs of the licensee are catered for and the agreement is drafted so explicitly that there is no room for doubt in the minds of any of the parties in the value it serves for all involved. Just like insurance, you simply don’t want to be caught without this disaster management in place when something unforeseen occurs.

Escrow Europe for South African Businesses and Developers

 Some escrow service providers only offer an ‘off the shelf’ service which may be convenient in some circumstances, but is inflexible to specific client needs. This is where Escrow Europe offers a personal touch that doesn’t go unnoticed. We design and tailor our escrow solutions to dial in to your specific requirements.

Our team provides professional, legal drafting services, together with technical advisory and a fully automated administrative client portal. This is over and above the personal interface with our support and experts. Escrow Europe is also a member of the International Software Escrow Association (ISEA) and provides competitive pricing, an unrivalled IT risk framework and smart version control, as well as cloud escrow capabilities. Contact our team today! 


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