Why you need escrows and How it works

Whenever your business makes a significant investment in a software license, you have to consider the question, what if the developer goes out of business or refuses to properly support the software. Imagine a huge investment in software and then your developer goes under. How would you maintain the software without them? Could you add features as needed? Could you continue to upgrade your investment to keep up with the latest and greatest?

It has long been the bane of the business world not to trust some associates at all and yet to trust others blindly. We use safe deposit boxes and lockers provided by banking institutions almost everyday. These same lockers can be used not only to safeguard our own assets, but also safely transfer them to someone else. Only someone with the same set of keys can open your box and gain access to those assets. The same is the principle of 'Escrow Services'. An escrow is merely a third party to your contract with someone else. It is the duty of the ESP (Escrow Service Provider) to safeguard your transaction to the end. So far, such services have been heavily utilized in the fields of finance and law. However, with the increasing adoption of global information services, where developers and end users are ever on the other side of the world from each other, escrow services has found a new extension in the realm of computer software.

How it works?

Escrow services are commonly used as a safeguard against bankruptcy. If the developer (known as the 'software licensor') goes bankrupt and can no longer continue to provide his services to you as before, the escrow agent(EscrowTech India (ETI)) will release everything placed with them, in relation to your particular contract with that developer, to you. Let's take an example to understand this better.

Let us say A and B have made a deal. B is to develop and provide A with custom software X. They rope in ETI who provides escrow services. A and B tell ETI that if B goes bankrupt, ETI is to release all source code to A and other material to do with X. Say some years down the line B goes bankrupt and is forced to shutdown its business. A informs ETI of the development. According to the established agreement, ETI immediately releases the material to A after due verification of facts.