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WorldEscrow N.V./S.A.
Your Business Continuity, our Service.

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Contact us

Worldescrow N.V.
Graaf van Egmontstraat 15 bus 1
2800 Mechelen
Belgium
Tel +32 (0)15 20 44 50

Flanders Bio

IT Development and Software Escrow

Dear IT Supplier,

Introduction

This letter is meant for all IT Developers or Suppliers, whether working as an internal or an external expert. As soon as optimizing your business offer and Business Continuity come into the picture, consider software escrow as part of your service.

The technology solution you’re providing is of a significant business value to your client. Your client’s business largely depends on the technology you provide, so from a customer service point of view, a contractual and technological relevant continuity solution should be almost immediately included in the discussion. The most obvious one is called software escrow. The continuity problem stands no matter if it is custom mission-critical software, a cloud ( SaaS) solution, in-house development or even generic IT-solutions that are involved: implementing the right type of technology escrow ensures your customers’ business continuity, and thus your service being impeccably complete. WorldEscrow’s portfolio of escrow services protects software developers and suppliers by ensuring that the knowledge from development remains accessible and the Intellectual Property remains with its owners.

Software Escrow, what is it?

Software Escrow is a contractual arrangement where you as a supplier or distributor of software gives the source code of said software in custody with an escrow agent, acting as a trusted third party. As a trusted third party, being independent and neutral, the escrow agent keeps the deposit in custody as a “prudent man” –caring for the deposit most diligently. Should certain predetermined events occur or should certain conditions be met, the escrow agent will release the deposit to the users of the software, the so called beneficiaries of the agreement.

The business logic behind this: when you as a supplier no longer can, or wants, to fulfil your obligations with regards to the development, maintenance and operability of the software, this may cause business-disrupting problems for your clients. In order to guarantee these problems are limited to the absolute minimum them, your customer and you agree to deposit an exact copy of the relevant materials -most notably the source code and documentation- with a professional escrow agent. This agreement allows the escrow agent to release the deposit to the beneficiary – under very strict circumstances – allowing the beneficiary to maintain the software -by himself or under license with a third party. However, the agreement includes the explicit guarantees that you remain sole owner of the intellectual property. A good software escrow agreement is a guarantee for business continuity with both supplier and its client.

Why software Escrow?

In order to maintain and alter the software, one would need the original source code and complete documentation of the program. These materials are mostly your intellectual property and are rarely delivered to the user(s), which is the reason for maintenance agreements between users and yourself. In these instances, the supplier takes on the responsibility of keeping the software up to date and maintaining the performance. This is even more pronounced with SaaS or Cloud solutions, where the connection between actual application and user is nothing else but a license agreement, and the user is dependent only on the well-functioning of the supplier and its surroundings. As such, it is an added bonus if you, being the supplier, acknowledges this and have a contingency plan in place. One that can be integrated in your existing service contracts, is relatively low-effort from your part and is potentially profitable in the process, while giving your client an added security he will be hard pressed to find elsewhere.

At the same time, a software escrow arrangement is an excellent exercise in knowledge management, in favour of all parties. At reception of every deposit, a verification on the quality of the deposit is executed. Completeness, content overview, presence of passwords, encryption keys, traceability and recoverability of third party software are among the elements that are always checked. The code can be compiled, certain critical issues can be tested in depth if so demanded, after which all findings are documented and reported, creating significant added continuity value. This last aspect makes an escrow exercise even valuable within internal, custom made IT-projects, simply because most continuity-critical issues are investigated, documented and safeguarded in a structured and transferable way. The moment the project team dissolves and the knowledge is distributed/starts dissipating, there’s still an escrow deposit with all key documentation on the process and resulting software.

Software Escrow: when is it recommendable?

When the software is of vital importance to the users’ business operations

When replacing the software would take substantial amounts of time

When converting the software would obstruct the business operations’ continuity

When switching or replacing the software requires a significant financial investment

When the current software has required significant financial investment

When replacing the current software would cause significant financial losses

Software Escrow: goal and purpose

To offer continuity in the use of software where this would be impossible without escrow provisions.

To secure and affirm the underlying business processes

To protect investment (in the software, but also the accompanying hardware)

To facilitate trust between parties

As a part of the Corporate Governance Policy, e.g. Business Continuity Management, Risk Management and Knowledge Management

Software Escrow’s uses for the Supplier

Escrow is the most useful way of offering a complete support to the beneficiaries without having to fear for intellectual property infringements. The Intellectual property of the deposit remains with the supplier, even after release of the deposit.

Escrow is an additional safeguard for the supplier as a knowledge deposit. Should – for any reason – knowledge of the product be lost at the supplier, this knowledge can be recuperated from the deposits at the escrow agent.

The deposit may be useful in conflicts regarding intellectual property – even within the supplier’s organization.

Depositing the software at an escrow agent may serve as a quality check of the product by an external party, allowing you to improve the product itself in later iterations.

As an additional bonus, a WorldEscrow agreement offers you certain advantages over traditional insurance options:

Escrow completes your service offer. If included in your business proposition, you can make a tidy profit out of it

The depositing itself objectivizes your IP: it is clearly and neutral described and documented – no discussion possible on the contents

It allows a structured recap of your product in all of its versions – a knowledge management aspect not to be underestimated

The time you spend in the composition of the deposit, the alterations and the assistance in the verification, can be invoiced as actual work hours

as your client is the beneficiary of the escrow arrangement, you should not bear the costs per se

Make an existing escrow-arrangement to a commercial asset: it is a quality stamp to be used to your advantage.

Software Escrow and the professional caretaker (or Escrow Agent)

Two inseparable elements are of vital importance for a solid software Escrow settlement: the technical aspect and the legal aspect. A professional Escrow agent has to be capable of providing an ironclad cover on both with an in-house (and thus independent) legal and technical staff. The technical staff needs to be capable of, on top of the standard coverage, delivering additional verifications on the deposit, which requires very specific expertise.

The technical aspect entails the quality of the deposit, which is assessed by these factors:

The data on delivered media can be read

The material, referred to in the contract, is present and complete

The deposit is free of viruses

The deposit is well documented

The deposit is up to date – which causes us to request at least an annual update

The legal aspect concerns the escrow agreement itself: a solid and well balanced contract has to offer a proper protection for both parties. For the supplier, the main focus is the protection of the intellectual property and knowledge management/recovery. For the beneficiary, the primary focus is business continuity.

Release of the deposit never implies the transfer of any intellectual property right, only the right for actual utilization.

WorldEscrow, who is it?

WorldEscrow is one of the oldest and most important independent Escrow Agents, active in several countries worldwide.

WorldEscrow’s core activities are the following:

To safeguard the software source codes

To legally guide the creation and set-up of contracts for depositing software

To verify the deposit

To store and strictly secure the deposit

To guarantee continuity.

We are at your disposal for further information and discussion on these subjects !