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Source code escrow

Source code escrow definition

Source code escrow is a licensing agreement where a third-party agent holds the source code of the software. It’s structured so that the software’s code is released to the client or customer of the software under specific conditions.

See also: Key escrow, escrow passwords

Benefits of source code escrow:

  • Protection for licensees. This contract protects businesses relying on proprietary software. For example, if the developer goes out of business, fails to maintain the software, or otherwise is unable to fulfill their support obligations.
  • Security for software vendors. For software developers, this provides a competitive edge. Escrow reassures hesitant clients that they can rely on this software.
  • Continuity of business operations. Companies ensure the continuity of their business — they can access the source code if necessary.
  • Compliance with regulations. In some industries, regulations may require having an escrow arrangement to ensure continuous access to critical software systems.
  • Flexibility in customization. Clients can customize or adapt the software to their specific needs if the developer can’t or won’t.

Examples of source code escrow:

  • Standard Escrow Agreement. The developer gives the source code to the agent. The agreement specifies conditions under which the client can access the code.
  • Multi-beneficiary Escrow. It’s similar to the standard agreement but involves multiple licensees. This is common in situations where a software product has several customers.
  • Software-as-a-Service Escrow. In addition to the source code, the escrow may include data, databases, and documentation necessary to continue the service.
  • Custom Software Escrow. For custom-developed software, the agreement also includes documentation, development tools, and environment details necessary to understand and use the code effectively.