Contributed Content
By Jackson Malnati
“I’m not even sure what I should be asking.” I hear this question all the 
time. Whether you’re in the role of software developer or licensee, whether your application is on-premises or in the cloud, uncharted territory is still uncharted territory.
After participating in hundreds of these discussions, I’ve realized some considerations are almost universal. This article serves as a beginner’s guide for what to look for as you take the first steps in establishing a software escrow account. (Please note: Different people use different terminology; software escrow can also be called source code escrow or technology escrow.)
If you’re confused about entering into an escrow agreement, you’re in a good company. It’s a foreign concept to many of the people I speak with, and while setup may at first seem daunting, rest easy.
In consideration of all the moving parts in the escrow process,
let’s break it down into three overarching questions:
- Why are we setting up a software escrow account?
- How do we want the escrow account to work?
- How do we know it is working as planned?
- Why are we setting up a software escrow account?
If you’re a software developer, perhaps you’re simply looking to maintain a current copy of your application’s software source code (your intellectual property) in a secure location. Or, it could be to satisfy a request from a large organization or governmental entity that is evaluating the purchase of your software. Many developers set up software escrow accounts proactively to assure their customers that they are a safe choice to do business with. If you’re entering an escrow agreement with the expectation of future clients having similar requests, your biggest consideration may be setting up a simple, repeatable process to streamline future requirements.
For software licensees, software escrow may be a part of the company’s overall risk strategy and continuity plan if they are signing a license agreement with a startup or smaller developer organization. Users of software can use escrow to protect their investment in a software application.
How do we want the escrow account to work?
Regardless of your role in the escrow relationship, all parties should be aligned on expectations. This means having knowledge of the software release schedule so that the most recent and relevant version of the source code and supporting materials are held in escrow at any point in time. As a developer, this means having a plan as to when source code and documentation will be deposited, and how this will be achieved. Will it be mailed in physically, or is it best to upload the material electronically? Another focal point is related to escrow release conditions. In the event of A, B, or C, the licensee gets access to the deposit material.
How do we know it is working as planned?
Once you’re up and running, it’s important to ensure that your escrow account is functioning the same way it was intended to when the account was initially created.
As a developer, chances are that your technology is being enhanced and refreshed as you add functionality. Updated deposits to your escrow account should coincide with these enhancements. For software licensees, we recommend that a specific deposit schedule is built into the escrow agreement. This ensures all the materials in the escrow account are accounted for and up-to-date in case a release is needed, and perhaps most importantly, that all parties have a clear set of expectations to follow.
Another best practice is escrow verification. Escrow Verification Services offer insight into the composition of your escrow deposits and will validate all the pieces of your escrow deposit is both complete and usable in the event of a release event.
I hope this information was helpful in jumpstarting your software escrow initiative. SW
For more information, please download these introductory eBooks.
A Licensee’s Guide to Technology Escrow
A Developer’s Guide to Technology Escrow
Jackson Malnati is an escrow advisor for Iron Mountain’s Intellectual Property Management (IPM) group. He guides individuals who have been tasked with establishing a software escrow account for their organization. To contact escrow advisor directly, please call 800-962-0652 or email escrow@ironmountain.com.
Oct2019, Software Magazine
