What is Software Escrow?

Software escrow is when a software vendor gives a copy of a program, source code, other related files, or digital asset to an independent, neutral 3rd party (i.e. Tower 48) for safekeeping until a release condition is met. The escrowed assets can then be handed over to one or more other parties, often the vendor’s client when certain conditions occur. There is a contractual agreement in place defining the exact conditions that must be met (such as the vendor going out of business, the vendor not supporting the product anymore, or the customer rendering payment) in order for the transfer of the escrowed assets to a beneficiary to occur.

Software Escrow benefits both vendors and customers. Software vendors who have their source code in escrow are more likely to win contracts over those who don’t, without having to give up their source code, thus keeping their core assets protected. Vendors can hold their assets in escrow until pre-defined release conditions (final payment for example) have been met, upon which the assets will immediately be released to the beneficiaries. Customers benefit since they are reassured that scenarios such as their software vendor “disappearing” (through bankruptcy, merger, product abandonment, or for any other reason) is not a risk factor since they will have immediate access to the source code or other escrowed assets.

This gives both parties peace of mind and economic and logistical security, as the investment of all parties is well protected in any scenario imaginable. A crucial aspect for both parties in today’s uncertain economic climate!