In an ever-growing digital landscape and a continued dependence on SaaS solutions, customers are considering which vendor to choose from among many options. Escrow can help differentiate your business from the rest while securing your source code and intellectual property (IP) safe in the event of a release condition.
In this blog, we’ll walk through what escrow is, the benefits of such documentation, and when to know you’ll need one.
How Do Software Vendors and Escrows Work Together?
Software escrow is a service designed to ensure business continuity for a subscriber in the event of a business or financial disaster for the vendor. It provides a mechanism for a vendor to securely share its software application license with a subscriber. A separate third-party escrow agent will keep the information until there comes a time when it needs to be shared.
Developers don’t necessarily want to give away the source code they worked hard to build to just anyone. But, when a customer is choosing vendors, offering escrow can secure the subscription.
Customers often worry about what will happen if their SaaS vendor goes out of business or fails to maintain their software. Escrow gives the subscriber a safety net if these scenarios were to happen.
4 Types of Escrows for Software Vendors
During your research, you may find terms like software and source code escrow. These terms are interchangeable and can be used to describe storing the source code and all of the other data related to your software service. Escrow covers all trade secrets and IP security information.
SaaS escrow is similar to software escrow but focuses on SaaS vendors. It works to help protect subscribers from losing access to mission-critical data and use of the application . The escrow provider helps ensure the SaaS customer has access to the source code if the business fails.
Technology escrow is similar to software and SaaS escrow but focuses on all other licensed technology assets that are not in the digital space. Those assets can include blueprints, hardware schematics, firmware source code, circuit designs, protocols and standards, CAD models, proprietary algorithms, molecular structures, prototypes and samples, manufacturing processes, trade secrets, research data, configuration and calibration data, custom tooling designs, and training materials are examples of deposit materials in technology escrows that are not exclusively software or SaaS-based.
Data and domain escrow help to protect the foundations of a business and its developers’ work in a similar fashion.
How Does Escrow Work for Vendors?
Software escrow is a three-party agreement among the licensor (software vendor), the licensee (the SaaS subscriber), and the escrow provider.
While the escrow is being written, the licensor must include all of the necessary information to operate the software including the source code and all essential updates. This piece must include warranties and support for the material.
Meanwhile, the licensee who initiated the agreement must monitor for compliance between the vendor and the escrow provider.
Finally, the software escrow provider’s responsibility is to receive and deposit the material provided. From here, the provider will protect and control the information for the duration of the agreement or release the data if the conditions are not met.
3 Uses for Software Escrow
The benefits of establishing software escrow are clear for the subscriber: their business won’t be disrupted if the vendor does not meet their duties. But what benefits are there for the software vendor?
1: Protects Your IP Rights
IP is protected by establishing documentation around your mission-critical data. You could implement trademarks and copyright policies for your brand, but escrow helps to put your information in a safe place with a single company instead of scattered across multiple customers requesting escrow.
2: Establishes Credibility
When a potential client is searching for a software vendor, they’re just as concerned with security risks as you may be. You may be able to negotiate a longer contract or win a customer over more easily with the proposition of escrow. This shows that you understand your subscriber’s concerns before they even voice them. Investment protection insurance that escrow represents could put your prospect at ease knowing that the partnership is a win-win no matter what may happen in the future.
3: Secures software development lifecycle
Protecting your data assets from potential security vulnerability and avoiding the chance for your software development work to be duplicated elsewhere, you are securing the software development lifecycle. This lifecycle consists of:
- Planning
- Designing
- Implementing
- Testing
- Deploying
- Maintaining
This process helps ensure technology continues to grow; with your data protected with escrow agreements, your business and development teams have the chance to innovate for better results.
How do you Know You’ll Need an Agent?
You may be wondering if every software customer should come with it a software escrow. The short answer is not always. Escrows take time and cost to set up and maintain, and you need to know if it’s necessary to set one up.
To which, consider what the current financial market looks like for tech companies – especially in your industry. If you’ve seen headlines of large and small SaaS businesses needing bailouts or going bankrupt, it may be necessary to contact a software escrow agent. Instilling a sense of trust and reliability during these instances can help boost your credibility with clients.
Other reasons a customer may contact an agent could include:
- The vendor doesn’t seem financially stable
- The vendor has not performed the necessary updates
- The vendor has shown signs of potentially going out of business
The size of the business should not be your only determining factor of whether to engage an escrow agent. Instead, imagine what position your business may be in if the customer were to share your source code with a competitor or start building their own software based on the data you provided.
Escrow can help ensure business continuity.
Escrow Tech can help you identify the right time to draw up an agreement because we’re powered by a legacy of support services with a proven track record of trustworthiness. To learn more about software escrow and our services, check out our article on Doing Software Escrows Right, today.