Australian Tech Insolvencies Surge: Why You Need Software Escrow for Business Continuity

The Australian business landscape is in crisis. The latest data from the Australian Securities and Investments Commission (ASIC) shows over 11,000 companies entered external administration in FY2023-24 — a 39% increase from the previous year. Even more concerning, experts project this number will climb to 14,000 companies in FY2024-25.

But one sector is feeling the pressure more intensely than others: technology.

Tech company insolvencies jumped 33% from February 2023 to February 2024. This trend is accelerating, with another 23% increase projected by February 2025. These aren't just statistics — they represent real businesses collapsing and leaving customers in perilous situations.

When tech vendors fail, businesses suffer

When even mid-sized tech providers go under, the effects ripple throughout the economy. Recent failures include:

• Euclideon: Their 3D visualization technology supported multiple industries, including mining and urban planning.
• Plutora Australia: Their IT management tools were embedded in enterprise operations nationwide.
• Redback Technologies: Their innovative energy storage solutions left customers with unsupported hardware.
• Emerson Media: Their custom software solutions went dark when they closed doors.

These failures reflect broader economic pressures: interest rates at 12-year highs, a venture capital drought, persistent inflation, and the aftermath of pandemic overhiring. NSW (4,634), Victoria (2,862), and Queensland (2,036) have seen the highest numbers of company failures.

The risk most businesses see too late

When a software vendor fails, their customers face an immediate crisis. Critical systems suddenly become:

• Unsupported and vulnerable to security threats
• Unable to receive updates or bug fixes
• Impossible to modify for changing business needs
• Completely inaccessible if hosted by the vendor

Most companies discover these risks after their vendor has already filed for administration. The typical response involves costly consultants, legal battles over IP rights, and scrambling technical teams — all while operations deteriorate.

Why software escrow has become essential, not optional

Software escrow was once considered rarely-needed insurance. That's changed dramatically. Most escrow providers now handle a few trigger events monthly, compared to just one or two annually before the economic downturn.

What exactly is software escrow?

Software escrow creates a legal arrangement where a neutral third party holds critical software assets in trust. If specified release conditions occur — such as vendor bankruptcy — these assets become available to the customer, ensuring business continuity.

But modern software escrow goes beyond simple source code storage to include:

• Complete application environments
• Cloud deployment templates
• Database structures and content
• API documentation
• Configuration settings
• Runtime dependencies

This comprehensive approach ensures you can actually use the software, not just possess its code.

Five ways software escrow protects Australian businesses

1. Ensures operational continuity

When a vendor becomes insolvent, customers with escrow agreements maintain access to their critical systems. This prevents the operational nightmare of suddenly losing access to essential business tools.

2. Provides leverage in acquisition scenarios

Vendor acquisitions frequently result in product discontinuations or forced migrations. With escrow protection, you gain negotiating leverage and time to plan transitions on your schedule.

3. Protects intellectual property investments

Many Australian businesses invest heavily in customized software. Escrow ensures this investment remains accessible even if the vendor disappears.

4. Ensures regulatory compliance

Australian businesses in financial services, healthcare, and other regulated industries must demonstrate business continuity plans to regulators. Software escrow provides documented evidence of these plans.

APRA specifically mentions "third-party dependencies" in their operational resilience framework (CPS 230), which software escrow directly addresses.

5. Strengthens vendor relationships

Contrary to common misconception, escrow doesn't signal distrust. It demonstrates mutual commitment to business continuity and establishes clear expectations.

Our clients report that proposing escrow actually strengthens vendor relationships by showing serious commitment to the partnership.

How modern software escrow works

Codekeeper's escrow solutions offer sophisticated protection far beyond traditional source code vaults:

1. Customized agreement creation: A three-party agreement between your business, the software vendor, and us establishes clear terms and release conditions tailored to your specific risks.
2. Comprehensive deposit automation: We offer automatic integration with 50+ development platforms like GitHub, Azure DevOps, and AWS to ensure deposits stay current without manual effort.
3. Verification testing: Regular verification ensures the deposited materials actually work. This includes build testing, functionality verification, and documentation reviews.
4. Secure storage with monitoring: Materials are encrypted (AES256/512), access-controlled through multi-factor authentication, and continuously monitored for completeness.
5. Release processing: If release conditions occur, 24/7 event processing ensures timely access to escrowed materials with expert support for transition.

» Learn more about Codekeeper's state-of-the-art escrow solutions for modern businesses

Protect your business in uncertain times

As tech insolvencies continue to rise in Australia, proactive businesses are taking steps to protect themselves:

• Consider software escrow as essential infrastructure, not optional insurance
• Implement comprehensive protection that goes beyond source code
• Include escrow requirements in all new vendor contracts
• Verify escrow deposits regularly to ensure they actually work
• Review and update release conditions to match current business needs

The companies that survive during this period of vendor instability will be those that planned ahead.

Don't wait until it's too late

Most companies implement software escrow only after experiencing a vendor failure. Learn from their costly lesson. With tech insolvencies projected to rise another 23% next year, the time to act is now.

Our team offers free software risk assessments to help identify your critical dependencies and develop a protection strategy tailored to your needs.

» Book your free software risk assessment today

Is your business prepared for the software vendor insolvency crisis? Contact our escrow specialists to learn how our comprehensive protection solutions safeguard your operations against the rising tide of tech company failures.