Top 5 Software Escrow Mistakes Made by End-Users
Posted by Christine DeFazio on Thu, Sep 30, 2010
Blog by: Grayson Tsanos Burnhart
Reserve the option to ask for escrow protection
Many times End-Users will ask the “what ifs” during negotiations and say they would like the vendor to escrow; however, unless the End-User enforces and demands the vendor do the escrow agreement, the vendor typically will not do it.
Not testing the software
The escrow deposit is only good if it works and if all necessary materials are in escrow. It is imperative that the End-User know that the materials in escrow can work should a release occur. In some instances, the materials in escrow lack build documentation and the full application. These materials are deemed important to an End-User's business in a release.
Not reviewing the agreement
Should the Developer have a previous established relationship with an escrow agent, the End-User is simply enrolled under that agreement. However, the End-User needs to know what the terms are and in what instances they have access to the code.
Asking for escrow protection after concerns are present
The time to ask for escrow is during negotiations and when money is going to be exchanged. This is when the End-User has the most leverage and can ask for the most appropriate terms and can even suggest escrow language be in the license agreement. Once the main agreement has been established, the Developer may simply refuse the request for escrow or enroll the End-User under an agreement with terms that are favorable to them.
Assuming that escrow isn’t necessary
When purchasing mission critical software, escrow should be mandated in the license agreement. What happens if the company goes bankrupt? Out of business? Stops supporting the software? Or key point of contact leaves the company? The End-User needs to make sure they are protected on all levels.