Skip to navigation Skip to main content Skip to footer

10 June 2021

What you Need to Know about the Software Escrow Release Process


It’s 6:30 pm on a Friday (the last business day of the month), and the custom application your developer promised would be installed, setup, and configured before the end of the day, is worse than late this time – it’s an absolute no-show. If this was the first time something like this happened, I’m sure we can all agree that we’d hope everything was OK. Instead, this is now the third time (in a row) your vendor missed the scheduled release of the application and you’ve had enough.

Note: This particular application is designed and hosted (by a small developer) to support all of your company’s operations from scheduling, dispatching, managing customer information, invoicing, job costing, time management (employee time in/out) … basically it’s business-critical. Since this application is custom, it requires ongoing updates, and routine maintenance and support. Without the developer’s assistance, the system is pretty much useless.

You try to access your developer’s website for “click to chat” customer support, but the website is down! You call the company number for the developer and the line is busy. So, you call the sales rep who was responsible for selling you the system, but her phone goes straight to voice mail. You make one last attempt to connect via email to the owner of the company and he admits the company is going bankrupt and he’s really sorry there wasn’t more that he could do.

Thank goodness you have an escrow agreement in place because this creates potential options during a time of crisis. Step one is reaching out to your third-party escrow provider (such as Iron Mountain) and begin the release process.

The Typical Escrow Release Process begins:

As the “beneficiary” to an escrow agreement, your first responsibility is to contact your escrow provider via written notice. Your escrow provider will forward the written notice to the “authorized contact” for the developer. The developer’s authorized contact will have ten business days, from the date the notice is mailed to agree and authorize, remain silent, or dispute. If they agree, the escrow provider releases the escrow materials. If they remain silent (essentially, they are gone) we automatically release at the end of the period. If they dispute, we follow the dispute resolutions process outlined in the agreement after receiving contrary instructions. Contrary instructions refer to a written statement by the depositor that a release condition has not occurred or has been resolved.

Most escrow providers are authorized to release deposit materials to the beneficiary if they do not receive timely instructions from the developer. This is designed to cover a situation where the company simply shuts its doors.

Note: Before a release request can be fulfilled by an escrow provider, all escrow fees must be paid in full, and any party can cure a default of payment of fees.

Once the escrow material has been released, your company will need to accomplish the following steps to have the application running:

  • Read the media and supporting documents
  • Understand and recreate the developer’s software development environment
  • Compile the source code
  • Recreate executable code
  • Install the code onto appropriate “production” systems
  • Run the application

In closing, we cannot emphasize this enough: verification testing is essential – if you do not test your escrow material on a routine basis, then managing and maintaining an application, in the absence of your developer, will be a difficult task. On the developer side: the challenge most developers face when it comes to participating in an escrow relationship is always providing a complete and up-to-date set of materials for escrow because the devil is always in the details.

Need more information?

Our experts are here to help you.

Skip to navigation Skip to main content Skip to footer