SUMMARY: Selecting the right source code escrow account level ensures business continuity, operational assurance, and cost-effectiveness. EscrowTech offers customizable solutions tailored to single or multiple beneficiaries. Here’s a quick breakdown:
- Single-Beneficiary Agreements: Simplified agreements ideal for bespoke software solutions.
- Multiple-Beneficiary Agreements: Tailored for vendors with broad customer bases, available in three types:
- MB-SP: Centralized escrow with separated products.
- MB-SE: Separate agreements for each beneficiary.
- MB-Min-SP: Streamlined version of MB-SP with basic services.
- Customization: Agreements tailored to business needs for optimal security and flexibility.
Explore EscrowTech’s escrow options to find the right fit for your technology solutions.
What’s the first thing you should ask when choosing a technology escrow agency? We recommend asking how customizable and flexible their service offerings are. Ideally, the source code escrow agent you choose should, at a minimum, offer more than one account level.
Why? A one-size-fits-all approach rarely accounts for the unique needs of your solution or business model. Furthermore, it may not reflect the type of relationship you have with licensees, creating more work and expense. Likewise, certain industries require more security or discretion. Customizing an agreement at the correct service level leads to peace of mind and can even help you offset the cost of the service.
But what is the difference between various source code escrow account levels? More often than not, each one provides a different level of service and security. Choosing the right one can provide peace of mind and help you achieve your budgetary goals. Continue reading to learn about the types of escrow accounts we offer at Escrowtech.
How to Determine Your Source Code Escrow Account Level
The first consideration when choosing a source code escrow account level is the number of beneficiaries involved.
Every source code escrow agreement includes pre-determined trigger conditions or release conditions. These are typically adverse events, such as bankruptcy, closure, or discontinuation of a service or solution. Under these conditions, the escrowed source code will be released.
A beneficiary is the party that stands to benefit from the release of the deposited source code. Typically, this party is the licensee or end-user of the software in escrow. This person or organization requires the source code for business continuity and operational assurance.
The primary distinction between different source code escrow account levels is whether your agreement is a single-beneficiary agreement or involves multiple beneficiaries.
What Is a Single Beneficiary Agreement?
In a single-beneficiary agreement, there is one beneficiary, typically a single licensee or customer of the software vendor. These agreements are typically the least complex and simplest to manage. Triggering events are specific to the relationship between the software vendor and the single beneficiary.
Such agreements are ideal for bespoke software solutions or when a specific customer needs assurance.
Example of a Single Beneficiary Agreement
A company that relies on proprietary software for internal operations negotiates a single beneficiary escrow agreement. This ensures access to the source code if the vendor cannot support it.
What Is a Multiple Beneficiary Agreement?
In the case of multiple-beneficiary agreements, the agreement is set up for the benefit of multiple beneficiaries. It involves several customers or licensees of the software vendor.
These agreements are more complex because they must address the rights, obligations, and release conditions for multiple parties. As a result, managing multiple beneficiaries usually requires additional administration. That increases the cost for both the vendor and the beneficiaries.
In a multiple-beneficiary agreement, each beneficiary may have slightly different terms depending on their relationship with the vendor. Therefore, the release conditions may or may not be unique to each beneficiary. For example, one beneficiary may have a service-level failure while another does not.
Such agreements are most suitable for vendors with a broad customer base needing uniform protection across many clients.
Example of a Multiple Beneficiary Agreement
A software vendor with multiple enterprise customers may set up a multi-beneficiary escrow agreement. This single agreement provides assurance to all its clients in case the vendor cannot fulfill its obligations.
Types of Multiple Beneficiary Agreements
At EscrowTech, we offer three types of software escrow accounts for vendors with multiple beneficiaries:
- Multiple Beneficiary Source Code Escrow with Separated Products (MB-SP). One escrow agreement covers multiple beneficiaries. However, the materials in escrow are organized to reflect the specific software or products used by each beneficiary.
- Multiple Beneficiary Source Code Escrow with Separate Escrows (MB-SE). Each beneficiary has a separate and distinct escrow agreement tailored to their relationship with the software vendor. A separate deposit of materials is maintained for each agreement.
- Multiple Beneficiary Source Code Escrow with Separated Products & Minimum Service (MB-Min-SP). The same as MB-SP, but lacking advanced services. This agreement may not include full verification, testing of source code, or detailed reporting. Online account management and deposit confirmation go to the owner only.
All of the above source code escrow account levels are flexible and can be customized to suit your specific needs. We even offer agreements for SaaS providers offering cloud-based solutions.
Separated Products vs Separate Escrow: What’s the Difference?
Separated Products
Think of escrow with separated products (MB-SP) as a centralized multiple-beneficiary escrow. It’s intended for software vendors who offer multiple products to different clients.
Since there is only one agreement for all beneficiaries, there is less administrative burden. The most substantial factor is that, under release conditions, only the product relevant to the beneficiary will be released.
Separate Escrows
In contrast, separate escrow agreements are ideal for vendors who license customized versions of software to different clients.
In MB-SE agreements, each beneficiary has their own escrow agreement with unique terms, release conditions, and obligations. That’s why such agreements are more administratively complex and, typically, more expensive. With that said, this approach provides the highest level of customization and control for each beneficiary.
Customizable, Flexible Source Code Escrow Account Levels
At EscrowTech, we aim to ensure our source code escrow account levels meet each business’s unique needs. Each type of escrow account above merely serves as a jumping-off point. We’re happy to customize an agreement to provide the precise level of service and security you require.
Learn more about software and technology escrow and discover what EscrowTech can do for you.