When Should I Use a Software Escrow?


The first step in effecting a good escrow is to ask if an escrow is needed. Neither the software vendor or licensee should waste time, effort, and money on an escrow if it is not needed.

For example, an escrow is probably needed if the licensee worries that:

  • The software vendor is not financially stable
  • The software vendor could go out of business
  • The software vendor might, willingly or not, discontinue maintenance and support of the software
  • The software vendor might, willingly or not, not breach its maintenance or support obligations

In making this assessment, the size and fame of the software vendor should not be the only considerations. Bankruptcies are not limited to small, unknown companies and individuals. Large companies also use the bankruptcy laws to reject contracts. Furthermore, any vendor might decide to drop support and maintenance of software products.

The licensee should envision itself in the position of suddenly being without maintenance or support of the software when any of the following occurs:

  • The software crashes, produces erroneous results or experiences incompatibilities with other software
  • The software needs to be updated due to changing business needs

In any of these situations, would it be beneficial to have source code and other materials such as build instructions, deployment documentation, virtual machines and a list of developers who built the software?

If so, an escrow might be right for your situation.