Software Escrow: A Best Practice Against Business Interruptions

January 23, 2012

When you and your developer establish an escrow agreement, you’re better equipped to manage unforeseen technical or operational risks—or even a business partner’s potential move to Costa Rica.

It’s the software development nightmare you live to avoid: The young turks at Pretty Awesome Mind Reading Software give you a knockout demo of their psychic software for smartphones. You sign off on an agreement, get the beta a few months later and start testing, reading consumers’ minds as they shop. Then, about six weeks into the test, the top guns lose their venture capital, and the CEO relocates to Costa Rica, leaving no forwarding address.

Such imagined nightmares are, sadly, quite possible. That’s why the old English proverb “hope for the best, but prepare for the worst” is actually an excellent strategy, especially if you’ve:

• Been through the chaos that can ensue when a mission-critical application fails;
• Purchased software from a start-up that went belly-up;
• Known a vendor that lost its lead developers—and therefore its technical support abilities—during a merger or acquisition.

To make certain that your company is protected against such risks, consider creating an escrow agreement with your software vendor at the same time you sign your software licensing agreement.

An escrow agreement works like this: The vendor’s source code is stored with a trusted third-party escrow services provider. If the developer can’t support its application in the future for any of the reasons outlined in your escrow agreement, you can request a code release from the escrow services provider. The provider will then contact the vendor on your behalf. If the escrow provider determines agreement terms have been met, you will receive a copy of the code that you can use. Imagine the peace of mind and calm this could bring if one of the aforementioned events happens and you face a business interruption.

Keeping Calm and Carrying On

Aside from ensuring your uninterrupted access to mission-critical software, an escrow agreement should also assure that your company will get technical support and maintenance service now and in the future. In fact, many businesses won’t even sign a software license unless there’s first an escrow agreement that assures these ongoing critical services. 

When crafting an agreement with a trusted third-party escrow services provider, think collaboration, not contention. With that in mind, no matter what may befall the vendor, your operations will be able to continue without a hitch. You’re also getting a guarantee that the source code will be safe and secure, since it’s housed in a climate-controlled, weather-resistant vault.

Much like a prenuptial agreement, a software escrow agreement is written to remove any doubts one party may have about the other’s intent, financial or otherwise. That’s why, next to choosing the best mission-critical software for your company, an escrow agreement may be the most important business decision you make.

Do you have questions about software escrow services? Read additional Knowledge Center stories on this subject, or contact Iron Mountain’s consulting services team. You’ll be connected with a knowledgeable product and services specialist who can address your specific challenges.

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