What to look for in a Software Escrow Agent

What to look for in a Software Escrow Agent?

During uncertain times, it’s important to know that the people and companies protecting your business-critical applications are here for the long haul and have the right tools to do the job. It’s also critical to know your Software Escrow Agent is an expert in security with ultra-secure vaults and time-tested processes to ensure you won’t run into problems.

Software Escrow Services are used to mitigate risk when negotiating a software or technology license agreement – and it benefits both the developer and the 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’s important to choose wisely because the software escrow agent your choose to deliver Software Escrow Services is responsible for both safeguarding the IP and granting access to it in the future when it may be needed to keep your business up and running – whether your technology is on-premises or Software-as-a-Service (SaaS).

Prospective software escrow customers should consider the following factors in choosing a software escrow agent and Software Escrow Services: size and longevity, diversification, oversight and management, public financials, and security protocols. 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 safeguards in place. Larger companies can simply absorb more losses and are more resilient.

You should also check to see how long the Software Escrow Agent has been in business and providing these services. Ask for references. Anyone can put up a website, but reputable Software Escrow Agents will show you how they have provided solutions for similar companies across industries and geographies.

Diversification

Diversification is another key factor. We can think of diversification in two dimensions. One is geographic and the other the range of services. Generally, geographic diversification is desirable in a downturn because it can provide stability from localized or regional downturns and better harness recoveries from global downturns, especially when such recoveries are uneven between regions. A truly global company is therefore desirable.

In addition, 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 only escrow services. A business with multiple service offerings tends to be more stable because a downturn in one service line can be offset by the strengths of other service offerings.

Oversight and Management

Oversight and management of the software escrow business are also key. Professionally managed and overseen companies (i.e., companies with a Board of Directors and experienced leaders) are better positioned to survive a downturn because they generally make better decisions than smaller agents that may not have access to such a deep well of experience and knowledge.

Public Financials

Financials reported by a public company provide key insights into the health of a business. Moreover, public companies are subject to regular audits and must follow generally accepted accounting principles which helps ensure the accuracy and reliability of the financials. In addition, public filings are covered by the financial press which can provide additional insights into the health of an escrow agent and potential trouble on the horizon. Accordingly, escrow agents from 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 vaults 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 that maintain their own Security Operations Center (SOC) for incident management and response will be best qualified to protect your valuable IP.

In short, these factors merit attention by all parties seeking a robust and sustainable escrow arrangement. Too often, buyers look solely at fees without considering other factors. As with any important purchase, prospective escrow customers should weigh all the factors when selecting an escrow agent. Do your research and make sure your software escrow agreement will work under all conditions – not just in ideal situations when the parties are least likely to use them.

Article by John Trotti