Focus on Escrow

In short an Escrow Solution is software assurance for your organisation and, for large projects, Netsite recommends that Escrow arrangements should always be put in place. For such arrangements, Netsite is a partner of NCC Global, one of the worlds leading providers of Escrow Solutions.

Traditionally, Escrow is a legal term meaning "money, goods or a written document, held by a trusted third party, pending the fulfillment of some condition". In the context of software this means "material that is owned by one party, the Owner, and would be required by another party, the Licensee, under certain conditions".

Popular types of material which are held under an Escrow Agreement include application source code, website material, source code for applications under development and financial models.

Under the Escrow Agreement, the Owner provides a copy of the material to be protected to the Escrow Agent (trusted third party). The agreement will then spell out the "trigger events" under which the material can be released to the Licensee. Some examples of triggering events are the bankruptcy or liquidation of the Owner, or the Owner's failure to meet contractual obligations to develop or maintain the material.

The importance of Escrow for a Licensee

The dynamic nature of the IT industry and the subsequent cost of advancing and improving computer systems dictates that most businesses today rely on a third party to develop and/or supply and maintain their vital software systems and websites. If for some reason, the supplier was unable to or could no longer meet his contractual obligations to supply, fix or maintain these systems, businesses would obviously be at risk.

An Escrow Agreement protects the material that will be required by the Licensee to enable their business to continue to function by acting in a similar way to an assurance policy. If a triggering event occurred, as specified in the agreement, the deposited material, for example software source code, would be released to the Licensee.

Statistics prove that the computer industry is extremely volatile. This is not only a reflection of the number of business failures, but also the substantial increase in mergers and acquisitions.

Why should a software vendor place source code in Escrow?

Placing source code in Escrow proves to the Licensee that the vendor has confidence in his business, his software and his ability to supply and maintain that software in the future. In addition the vendor is demonstrating conformance to the IT industry's code of best practice.

Having an Escrow Agreement in place adds value to the software because it offers extra security to the Licensee and shows that the vendor values the business of his customer. In many ways an Escrow arrangement is an invaluable insurance policy against unforseen events.

For more information please visit NCC Group