Do You Believe You Are Running A Resilient Business?

In today’s technology-driven world, businesses are becoming increasingly reliant on software applications, whether on-premise or in the cloud, as well as integrating third-party software and platforms into their critical operations. This reliance was recently highlighted by a Global IT Outage that caused significant disruptions across multiple sectors.

While leveraging these technologies ensures operational efficiency and drives innovation, a business’s robustness is also determined by its planning for unforeseen circumstances and compliance with an ever-growing number of regulations. This brings us to a critical aspect of business resilience: software escrow.

What is Software Escrow?

Software escrow, also known as source code escrow, is a three-party agreement between a software developer (the depositor), the end user (beneficiary) and the software escrow company. The objective of a software escrow agreement is to provide comfort to the end user that if the software developer is unable or unwilling to support the software, the code can be released to them.

Similar to software escrow, where critical software source code is stored with an independent third party, SaaS escrow applies the same logic to the entire cloud environment including the data hosted within a SaaS application. It allows businesses to protect their data that resides within SaaS applications hosted by a third party, protecting them against data loss.

Typical software escrow conditions outlined in a software escrow agreement usually include the following and may be negotiated between the parties:

• Insolvency: The state of being unable to pay debts
• Bankruptcy: Declared in law as unable to pay debts
• Discontinuing support or service of the software application
• Failure to support the product that is licensed to the Beneficiary and then failing to cure such a material breach within 10 days of notice
• Transfer of IP rights to a third party who does not provide the same level of protection provided for in the software escrow agreement

For software developers, the software escrow agreement would be set up to ensure the ongoing maintenance and continuity of the software for their clients while protecting their intellectual property (IP).

Why is Software Escrow and SaaS Escrow Essential?

Many businesses still operate under the illusion that their software providers will always be there to support and update their applications. However, this is not always the case. Companies can go bankrupt, get acquired, or shift their focus, leaving their clients stranded. Without access to the source code, businesses can face operational disruptions, security vulnerabilities and increased costs as they scramble to find alternatives. Here’s how software escrow and SaaS escrow can assist: 

1. Business Continuity: With software escrow and SaaS escrow, you ensure that your business operations continue running as normal even if the software provider ceases to support the product. Having access to the source code, other critical assets or even access credentials to a production cloud environment, businesses can maintain, update and troubleshoot the application, ensuring business continuity.
   
   
2. Risk Mitigation: Software escrow and SaaS escrow agreements mitigate risks associated with vendor dependency. They provide a safety net, reducing the potential impact on your business operations due to vendor-related issues.
   
   
3. Compliance and Legal Protection: Certain industries require stringent compliance and regulatory adherence. Software escrow and SaaS escrow can potentially help in meeting these legal obligations by ensuring that critical software is always accessible and maintainable.
   
   
4. Investment Protection: Businesses invest significant resources in integrating and customising software solutions. Software escrow and SaaS escrow protects this investment by ensuring that they are not left in the lurch if the vendor fails to deliver.
   
   
5. Regular testing and validation of software – Software escrow and SaaS escrow typically includes regular verification and testing services which are important to ensure the source code deposit will be accessible and usable if ever required with supporting documentation that can assist with recovery.
   
   

Implementing The Right Software Escrow Agreement

When a business is seeking the right agreement for their software escrow or SaaS escrow needs, there are several important factors to consider. By carefully evaluating these aspects, they can make an informed decision and secure a favourable software escrow or SaaS escrow arrangement. Here are some key considerations to look at:

1. Reputation and Expertise of the software escrow vendor: Choosing a reputable and experienced software escrow and SaaS escrow vendor is crucial. Look for one with a solid track record in the industry and positive client references. Assess their expertise in handling software escrow or SaaS escrow specifically, as this ensures they have the necessary knowledge and capabilities to meet your company’s unique requirements. Additionally, ensure that the software escrow vendor has sufficient professional liability and Errors & Omissions (E&O) insurance in place to protect against potential risks. Working with a multinational software escrow vendor also offers significant benefits. Choose one who can provide local support with locally employed personnel across the three main geographic business centres: North America, Europe, and APAC. This localised support can enhance service quality and responsiveness, catering to the specific needs and regulations of each region.
   
   
2. Software Escrow Agreement Terms and Conditions: Carefully review the terms and conditions of the software escrow agreement. A reputable software escrow vendor will offer an array of software escrow verification services to mitigate risks and provide post-release support. Flexibility in amending the escrow agreement is important to ensure that all eventualities, particularly release events, are covered. Also look for a software escrow vendor who can provide a variety of free template agreements, enabling a great starting point for negotiating the perfect software escrow agreement. It may also be beneficial to choose a software escrow vendor who can offer software escrow agreements under under various jurisdictions, including the United Kingdom, European Union, United States of America, Canada, Australia, New Zealand, Switzerland, Germany, Norway, Finland, Sweden, South Africa, and Singapore.
   
   
3. Consolidation of Agreements: There may be a requirement for multiple agreements, this can sometimes add to costings with some software escrow vendors. Find one that can provide creative solutions to consolidate multiple agreements under a master framework agreement (Multi Beneficiary Software Escrow Agreement) to save money.
   
   
4. Cost Structure and Fees: Compare the cost structures and fees of different software escrow vendors – it is surprising how much can be saved for a comparable service to what is being received today.
   
   
5. Security and Confidentiality Measures: Security is vital when it comes to software escrow. Enquire about the software escrow vendor’s security measures for storing and protecting the deposited source code. Look for industry-standard certifications such as ISO27001 and ISO27017 for information storing and cloud security. Additionally, ensure that the software escrow vendor can provide automated, safe and regular deposit updates and back-ups.
   
   

Conclusion

Running a resilient business means being prepared for the unexpected. Software escrow is a strategic tool that provides peace of mind, ensuring that your business can withstand disruptions related to software applications. By understanding the importance of software escrow and SaaS escrow and implementing a robust software escrow agreement, you safeguard your operations, protect your investments and strengthen your overall business resilience.

So, ask yourself again: Do you believe you are running a resilient business? If you haven’t considered software escrow, it’s time to rethink your strategy.

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About The Escrow Company

The Escrow Company, based in Atlanta, USA is the US division of Escrow London, a global software escrow and SaaS escrow company with offices also in London, UK, and Sydney, Australia.

We have invested considerable resources into innovation to reinvent software escrow for a SaaS world. The Escrow Company provides a range of SaaS Continuity escrow solutions suitable for AWS, Microsoft Azure and Google Cloud hosted SaaS applications. We support a wide range of clients includes major law firms, banks, central banks, insurance companies, technology companies and government organizations.

To find out more about our software escrow and SaaS escrow solutions, visit our  YouTube channel.