Blog

Tips & tricks for happy software development, deployment and licensing.

    Enterprise, Source Code Escrow

    How to Negotiate a Balanced Source Code Escrow Agreement

     

    A source code escrow agreement is beneficial to both the supplier and the beneficiary, but these two parties can at times appear to have opposing needs. That’s why it’s important to make sure that your licensing agreement is balanced.

    Fortunately, that’s exactly what source code escrow services are for. At CodeKeeper, we have both the technical and legal expertise to ensure that your licensing agreement is secured.

    We protect the interests of both the software vendor and the licensee.

    Based on our experiences, here are our top tips on how to negotiate a balanced source code escrow agreement.

     


     

     
     

    1. Going into negotiations, be aware of the benefits to you.

    A source code escrow agreement can protect the interests of both parties, as mentioned. For the beneficiary, the reassurance that they will not experience a business interruption in case the software vendor is no longer maintaining or updating the code.
    For the software vendor, utilizing a source code escrow agreement makes it easier to gain their client’s confidence. If you are a supplier that is known for being easy to negotiate with, you can develop a good reputation going forward and make future sales easier.
     
    Additionally, as a software vendor, if you find the right third-party escrow service, you can use that same agent for all of your customers’ escrows, keeping them all in one place, easy to access and manage.
     

     



    2. Clearly define the release conditions

    The licensing agreement typically defines a mutually-agreed-upon event that triggers the release of information from the software escrow to a legally entitled party.
    You can learn more about how a software escrow works by visiting the Codekeeper website. 
     
    You’ll want your licensing agreement to clearly define what the release conditions are. This way, all the parties involved know that the escrow materials will only be released to the licensee after a mutually agreed-upon event occurs.
     
    In the meantime, both parties should be assured that the source code is being held securely by the source code escrow service.

     


     


    3. Negotiate which materials need to go into the escrow

    It may be a no-brainer that the source code is going to go to the escrow, but you should not make any assumptions about what other materials will be included. In order for the beneficiary to make use of code if it is released, they’re going to need supporting documents.
     
    That means the software vendor should also be obligated to include any documentation surrounding the software, and anything else that the licensee would need in order to implement updates or changes to the software in case the supplier can no longer do this.

     


     


     

    Source Code Escrow, saas escrow, data escrow

    The Ultimate Guide to Software and Source Code Escrow - Chapter 7

    Who pays for software escrow services?

    The question of who should pay the escrow fees—the licensor or the licensee—has no right or wrong answer, and there is no established standard practice.

    On the one hand, there are certainly instances when the beneficiary pays the escrow agent directly. For the most part, however, it’s actually the licensor who is responsible for payment of escrow fees. This is something that is often considered an expected cost of running a licensing business.

    But even though the licensor may pay the fees, the licensee ultimately reimburses the licensor, more often than not. In fact, they may even pay a greater fee to the licensor at the outset to cover both escrow fees and the licensor's administrative expenses.

    The main reason that we see the beneficiary covering the cost of the escrow in some way, shape, or form is that the escrow is set up in their best interest. If a licensor were to go out of business for any reason, they wouldn’t be as concerned over what happens to the system that they’ve licensed out to clients. 

    So even if the beneficiary doesn’t directly cover the cost of the escrow by paying the escrow agent, they will still be paying that fee through their licensor’s service charge.

    Tip: To read more about who should pay for source code escrow (and how much), check out this article.

    Enterprise, Source Code Escrow

    How Much Does Software Escrow Cost?

     

    Although software escrows have been used since the 1970s, they are becoming increasingly more common and necessary as a practice for modern enterprises. As a result, there are a number of software escrow solutions on the market today, and some of them have been around for decades.

    However, not all software escrow providers offer the same services, the same level of quality and security, and the same ease of use. And then there’s pricing, of course, which is an important aspect in and of itself.

    So whether you’re a licensor or licensee on the hunt for your next software escrow, it’s important that you examine all of these factors to be able to choose a solution that meets your needs while providing top-notch security and flexibility.

    Codekeeper, in particular, was born out of a need for source code escrow that is simple to set up and use, fully automated and integrated into developer workflows, and last but not least, transparent and fair with pricing.

    In this article, we will consider the current situation in the software escrow market both in terms of use and pricing. We will also look into how Codekeeper’s modern automation technology allows us to offer a superior service at a much lower price when compared to other providers on the market.

     


     
     
    What is software escrow used for?
     


    Source code or software escrow is an agreement set up between a software vendor or developer (depositor or licensor), the client (beneficiary or licensee), and a trusted third party (escrow agent). In particular, software escrow puts a contractual obligation on the software vendor to store, with a trusted escrow agent, all source code, data, documentation, or anything else that would enable the beneficiary to update or maintain the software.
     
    It is most often used when a company (licensee) wants to protect its software from unexpected events, such as their software developer (licensor) discontinuing support for their software, running out of business, or breaching their contract. As such, source code escrow is also becoming an important aspect of enterprise risk management (ERM) processes for a growing number of organizations.
     
    From the perspective of a small start-up that provides the software, source code escrow levels the playing field and engenders trust. This is why a number of software vendors get ahead of it by establishing an agreement with a reliable escrow agent. This puts them in a position to use escrow as “the great sales enabler” by eliminating risk for their clients.
     
    There’s a lot more nuance to the escrowing process, but no matter how complicated this process may seem, a trustworthy and qualified escrow agent can help you navigate it with ease.

    Tip: If you want to learn more about what a software or source code escrow is, how it’s used, and how it might benefit your company, check out this guide for everything you need to know to get started.
     
         

    Source Code Escrow, saas escrow, data escrow

    The Ultimate Guide to Software and Source Code Escrow - Chapter 6

    What are some examples of release conditions?

    So we’ve caught up on Software Escrow and all the ins and outs. But what are some release conditions that can be incorporated in a Software Escrow agreement?

    Parties to the agreement are free to negotiate any release terms that can be validated independently by the escrow agent. Most commonly, however, these terms revolve around the licensor's financial or operational standing. A release may be triggered if, for example, the licensor enters voluntary or involuntary bankruptcy, or if the licensor fails to operate in the ordinary course of business (OCB). 

    Two other very common “custom” release terms that are requested by beneficiaries are that the material in escrow be released in case the vendor is acquired by another company, or if the provider fails to fix an error in the system within a given time frame.

    Enterprise, Source Code Escrow

    Best Practices for Software Escrow in Licensing Agreements

     

    Are you aware that you need to implement software escrow in your licensing agreements, but don’t know the best way to start? Then this is exactly the article for you.

    Below you will find information on what a software escrow is, why you need them in your licensing agreements, and what the best way to use them is.

     


     
     
    What is a software escrow?
     


    Software escrow is a service that helps protect all of the parties involved in a software license. The service is offered by a third-party that acts as a neutral agent to hold the source code, data, and technical documentation. The licensing agreement typically defines a mutually-agreed-upon event that triggers the release of information from the software escrow to a legally entitled party.
         

    You can learn more about how a software escrow works by visiting the Codekeeper website.

     

    Source Code Escrow, saas escrow, data escrow

    The Ultimate Guide to Software and Source Code Escrow - Chapter 5

    Why is having access to source code so important?

    In the case of typical, off-the-shelf software, only object code (i.e., executable code) is licensed out to the end-user. In commercial licensing deals, however, the licensee may have a legitimate interest in object code, as well as source code as an assurance that their mission-critical systems will remain functional. Accessing source code allows the licensee to see how the software is processing data or performing functions, and can even allow the licensee to change the operation of the software if necessary.

    In that sense, source code is the DNA of a software application. It is code that is written in a programming language that is readable (and modifiable) by humans, and without it, developers can’t debug or upgrade software applications. In other words, they can’t ensure that the system will continue working as intended.

    So if, for instance, a software vendor goes out of business, without modifiable source code, the software is as good as dead. Depending on how critical the software is to your business, the effects of losing access to the source code could be nothing short of devastating. Later in the ebook, we will examine some of the risks that software escrow helps mitigate, as well as the benefits that it offers to both licensors and licensees.

     

    1 2 3 4 5