What to Look for in a Software Escrow Agent | CNC Group

What is the role of a software escrow agent?

A software escrow agent is responsible for:

  • Support in the drafting and negotiation of Software Escrow Agreement between the software supplier and the end user(s) of the software.
  • Securely store periodic source code repositories made by the software vendor in a physical or virtual safe.
  • Direction Software Escrow Verification Test on the escrow deposit to ensure that it is correct, complete and can be used by the end user in a release event.
  • Release of escrow deposit to end user(s) of software if release event conditions are met.

What to look for in a software escrow agent?

In times of uncertainty, it’s important to know that the people and companies protecting your critical applications are there for the long haul and have the right tools to do the job. It’s also essential to know that your software escrow agent is a security expert with ultra-secure vaults and proven processes to ensure you won’t run into any problems.

Software escrow services are used to mitigate risk when negotiating a software or technology license agreement – and this benefits both developer and licensee.

This article reviews five key attributes to look for in an escrow agent to ensure they are the right partner to protect your valuable intellectual property (IP). It is important to choose wisely because the software escrow agent you choose to provide the software escrow services is responsible for both protecting the IP and granting access to it. in the future when it may be necessary to keep your business running – whether your technology is on-premises or Software-as-a-Service (SaaS).

Prospective software escrow clients should consider the following factors when choosing a software escrow agent and software escrow services: size and longevity, diversification, oversight and management, public finances and protocols for security. Here’s why:

Size and longevity

The size of the software escrow agent is an important consideration because, generally speaking, larger companies can more easily survive an economic downturn – they have more collateral in place. Large companies can simply absorb more losses and are more resilient.

You should also check how long the software escrow agent has been in business and providing these services. Ask for references. Anyone can build a website, but reputable software escrow agents will show you how they’ve provided solutions to similar businesses in different industries and geographies.

Diversification

Diversification is another key factor. We can think of diversification in two dimensions. One is geographic and the other is the range of services. In general, geographic diversification is desirable during downturns because it can provide stability in localized or regional downturns and better exploit recoveries after global downturns, especially when those recoveries are uneven across regions. A truly global company is therefore desirable.

In addition, the diversification of services is important. Within the escrow portfolio, a software escrow agent should be able to provide services for on-premises, SaaS, and hybrid environments. Ideally, the services provided by the escrow agent will be broader than just escrow services. A company with multiple service offerings tends to be more stable, as a slowdown in one service line can be offset by strengths in other service offerings.

Monitoring and management

Monitoring and managing software escrow activity is also essential. Professionally managed and supervised companies (i.e. companies with experienced boards and executives) are better positioned to survive a downturn because they generally make better decisions than smaller ones. agents who may not have access to such a wealth of experience and knowledge.

Public finances

Financial statements published by a public company provide key information about the health of a business. In addition, public companies are subject to regular audits and must follow generally accepted accounting principles, which helps to ensure the accuracy and reliability of financial statements. Additionally, public filings are covered by the financial press, which can provide additional insight into an escrow agent’s health and potential issues on the horizon. As a result, fiduciaries of publicly traded entities have a higher degree of transparency regarding their financial health.

Security

Security, availability and access are of paramount importance when choosing a software escrow agent. Both physical and virtual vaults (for a secure cloud environment) should have robust security protocols and strong access management controls. As software moves to the cloud, security becomes even more complex. Escrow agents who maintain their own Security Operations Center (SOC) for incident management and response will be best qualified to protect your valuable intellectual property.

In short, these factors deserve the attention of all parties looking for a robust and durable escrow agreement. Too often, buyers only look at fees without considering other factors. As with any major purchase, potential escrow customers should weigh all factors when selecting an escrow agent. Do your research and make sure your software escrow agreement will work under all conditions – not just ideal situations where parties are least likely to use them.