Software companies think escrow is useless

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Post by: Emily Simmons, Account Executive

So I have been selling software escrow services for almost five years now and commonly I get a call from a developer that tells me he doesn’t want to spend the money on a service that his client won’t be able to use, yet they are contractually obligated to set up a source code escrow agreement. I also get frantic calls from software companies that “hoped” their client forgot about the escrow obligation in the contract and now the software company needs to get them enrolled ASAP because they never fulfilled the obligation in the first place and the end user requests a copy of the escrow agreement that was never set up.

I completely understand. Why would anyone want to purchase a service or product that they feel is useless?

That is where I come in! I educate my clients and try to engage them enough where they are listening to me over the phone rather than checking their email and waiting for me to ring off a number they write down so they know how much escrow costs.

Escrow is not useless, but many companies have never experienced a release process in the first place or had a properly drafted escrow agreement that allows for a release process to be successful.

Below is a quick bullet list that I created to show that escrow is not useless to the software companies we love!

• First and foremost it is a great sales tool!
  Escrow Agreements show your client you are committed, take the “what happens if you go out of business?” elephant out of the room and help you close deals. In addition it helps you keep a pulse on if and when clients are going to renew with you or go with your competition. If they don’t renew their escrow contract a red flag should go up for your organization internally.

• With the proper deposit escrow is not useless.
  If you put a list of the key personnel involved in the creation of the source code, a list or even a copy of third party software necessary in order to compile the code, as well as thorough build documentation, a release can be successful. Either an end-user has the engineering staff to compile the source code and recreate it internally or they will hire on the engineers from the defunct software company to utilize what is in escrow.

• Testing and verification add value to the escrow service and can actually help software companies get organized. If the escrow agent properly simulates the release scenario by performing full verification on the escrow deposit we document all of our findings and give this information back to you. You can utilize our findings to help create better build documentation for internal use and show the results of the test to all other potential or current clients to increase your client retention rate and sales. Professional escrow providers have an expert engineer available that has experience compiling source code and will engage with your key developers to make the test successful.

• Escrow services allow you to lower your risk by offering redundant storage of your source code, and believe me we get calls every now and then that the software company needs a copy of what is in escrow for your own benefit – not even for the client’s benefit.

Escrow can actually be a better investment for the software companies that are reluctant to the idea. It provides additional back-up, often additional build documentation that can help improve your internal processes for creating the code, and allows you to bring in more business and keep your precious clients happy. In addition your risk is minimized by the restrictions of use clause in the escrow contract. Even if a release occurs typically your customer can only utilize the source code for internal purposes as the License Agreement allows.