Source Code Escrow Agreements
Source code
escrow agreements are a must if your online business
uses third party software. If a problem occurs with the
provider, you do not want to go down with them.
To understand the value of source code
escrow agreements, it helps to look at a simple
example. Let's start with the proposition that you own
a product site. You sell various things, have the site
tied into your inventory, send out email solicitations
and so on. All of this is controlled via a custom made
database you ordered from the software company Database
Widget, Inc.
The site grows for years and things seem to
be going well. You are having a coffee one morning and
reading the news online when you notice something -
Database Widget, Inc., just filed bankruptcy. You call
them immediately, but nobody answers. It turns out the
company closed the doors and, well, you are on your
own.
What is your next step? You are going to
want to talk to a lawyer, but your first practical move
will be to hire programmers to take over the database
work you need done. Then the big problem becomes
apparent. While you have the database on your servers,
you don't actually have the source code to it. Database
Widget, Inc., has it and they are history. Your
programmers can't make changes or updates to the
database. Welcome to disaster city. You are most likely
going to have to pay to have the database rebuilt from
scratch or try to buy the current code out of the
bankruptcy estate. Neither is a quick or inexpensive
option.
Source code escrow agreements are designed
to prevent these types of scenarios. The agreements are
used to establish escrow accounts that hold the
software code in question. When disputes or problems
arise, the software company is prevented from holding
the possession of the code over your head. Trust me,
this is a big chip in negotiations. As an online
business, this is the last thing you want to deal with
online.
Source code escrow agreements are considered
contracts, but they are really a form of insurance. If
you have problems with the software company you are
working with, they "insure" that you aren't strong
armed in negotiations.
If you need a source code escrow agreement
or have questions regarding them, contact me today at
619-637-6043.
Richard
