When Are Software Escrow Agreements Necessary?

As with all investments, it is important to consider how much risk you’re exposing yourself to when purchasing software that will become an essential component in your business operations. It’s also important to consider how you can minimise that risk. In dealings with software developers, escrow agreements may just be the best way to protect your investment and ensure a product has a future. But when is it necessary to use an escrow agreement and how will it protect your business? Here we take a quick look at when it’s best to enter into such an agreement.

When Are Software Escrow Agreements Necessary?

Small Software Developers

If you’re dealing with a small software developer that doesn’t offer the security of investment that a larger organisation would, it is often a good idea to look into escrow arrangements. A greater amount of software is now being developed by start-ups, entrepreneurial adventures and small businesses, many of which don’t necessarily have a secure future. If you are dealing with a small software developer and can’t be sure whether they’ll still be around in a year or two to offer support for their product, it is probably a good idea to look to a Source Code Escrow agreement.

Risky Investment

If you feel there is an unacceptable amount of risk in a transaction, you usually have one of two options. Either you can walk away and not invest in a potentially vital piece of software or you can spend money on a product that may make a loss. However, an escrow agreement provides businesses with a third option, that of minimising the risk. By holding the source code for future use, escrow agreements ensure that a piece of software can be continually developed, reducing the risk of purchasing a product that will soon be out of date.

Need To Ensure Control

Finally, escrow agreements are perfect for those businesses that need to ensure that they are in complete control of their affairs at all times. If you feel you need more information on the services offered by escrow agents or concerning the technicalities of such arrangements, you can click here.