Software Escrow: What It Is & How It Benefits Your Business

Software Escrow

Procuring or developing software through a third party can come with certain risks. Unfortunately, approximately 48% of software projects fail post-release quality tests, while 78% will experience scope creep and delayed timelines. 

These problems regularly stem from a misalignment of the goals and objectives of said projects. Ineffective requirements management doesn’t just result in added expenses and lost time — but project failure entirely.

One of the best ways to avoid these challenges and keep your systems up-to-date with modern compliance requirements is to procure software from an experienced third-party provider: namely, via a software escrow partner.

In this article, we’ll explain what escrow is, why it’s particularly important in software development projects, and what benefits it could offer your business.

What is software escrow? 

Simply put, software escrow is an agreement between three organisations (Software Developer, Beneficiary, & Software Escrow Provider) in which code is held by the Escrow Provider incase of a pre-agreed release event. 

Software escrow is crucial to providing comfort to the end user that if the software developer is unwilling or unable to support the software, the code, data and other critical materials can be released to them. Typical software escrow conditions outlined in a software escrow agreement usually include the following and may be negotiated between the parties: 

  • Insolvency: The state of being unable to pay debts
  • Bankruptcy: Declared in law as unable to pay debts
  • Discontinuing support or service of the software application
  • Failure to support the product that is licensed to the Beneficiary and then failing to cure such a material breach within 10 days of notice
  • Transfer of IP rights to a third party who does not provide the same level of protection provided for in the escrow agreement

For software developers, the software escrow agreement would be set up to ensure the ongoing maintenance and continuity of the software while protecting their intellectual property (IP).

What are the benefits?

Software escrow allows businesses to have greater confidence when making a significant investment in new software or services. It reduces much of the risk associated with a software migration project, and, with the right partner, helps businesses to:

  1. Meet governance requirements

Every business’s approach to governance will be different. But often, corporate policy for third-party applications or software development will outline the need for:

  • A disaster recovery plan
  • Business continuity planning
  • Acting in accordance with industry data security standards

A specialist software escrow partner will enable developers to deposit their source code, deployment materials, and other files directly into a secure escrow environment. There is also the option to carry out verifications to ensure the completeness and usability of the deposit material — reducing overall risk factors and bringing businesses closer to their procurement governance requirements.

  1. Encourage innovation

Digital innovation can directly impact a business’s success. According to recent surveys, 92% of SMEs believe that digital transformation is crucial to their business, while 56% of CEOs said that digital improvements have boosted their profits.

A software escrow partner can help you innovate with confidence, whether you’re looking to develop a new piece of software, start using AI, or implement cloud innovation. Your investment will be protected by an impartial third party, from initial code testing right through to the go-live period. 

Some software escrow partners will also be able to protect your SaaS investments by performing quarterly or annual verification testing according to your preferences.

  1. Optimise data security

Data security will be a top priority for every business, but particularly those in the legal, education, and financial sectors. Particularly as each sector will have its own specific regulatory requirements. For example, financial organisations will be concerned with matching SS2/21 and DORA regulations to enable their ICT risk and incident management.

Before proceeding with a software development project, data security specialists will need to find solutions to nuanced risk-based scenarios, such as:

  • How data will be protected if the software company goes bankrupt.
  • What to do in the case of a relationship breakdown with the partner software company.
  • How data loss will be prevented in the case of a breach or ransomware attack.

Software escrow providers can securely store your data to protect against these risks. By modernising your legacy systems, you can also improve your business’s compliance with key industry security standards.

Pro tip: It’s important to work with a software escrow partner that you can trust and holds international security certifications such as ISO27001 and ISO27017. To find a specialist software escrow provider, consider looking at certified software procurement platforms like AWS and Microsoft Azure marketplace.

  1. Ensure continuity of service

Software escrow can help ensure end users receive a seamless experience by preventing disruption caused by supplier failure or loss of service. Source code and other deposit materials such as databases and deployment scripts can be securely stored in a dormant state and, if the supplier’s contractual obligations fall short, restored to ensure users are not affected.

In order to ensure continuity of service, the software escrow vendor would perform a verification which would include extensive pre-deployment and deployment assessments, which review the built environment, source code structure, documentation, and third-party dependencies of a piece of software before it is released.

This information is compiled in a concluding verification report that allows businesses to gain an insight into the complexity of the environment and the ability to redeploy an environment in a situation where the software developer may not be around. 

Case study: An international airline partnered with Escrow London to establish a SaaS escrow solution that would protect their online booking system. A few months later, the airline’s SaaS vendor went into administration. Thanks to their software escrow agreement, the airline was able to utilise the AWS escrow environment hosted by Escrow London which prevented disruption to their customers. Read the full case study here.

Talk Think Do and Escrow London’s partnership

We at Talk Think Do have recently partnered with Escrow London. As one of the leading tech partners in the UK and certified Microsoft Solutions Partner, our specialties include:

  • Building bespoke cloud applications
  • Implementing AI technology to business use cases
  • Migrating clients to secure DevOps toolsets 

Escrow London is a multinational software escrow company that provides extensive software and SaaS escrow services. They are one of three UK software escrow companies on the G-Cloud 13 program, an AWS partner, and an approved vendor on both AWS and Microsoft Azure marketplaces.

Our partnership with Escrow London will allow customers to procure new software even more securely, choosing from Escrow London’s wide range of services:

  • Security Audits
  • Software Escrow
  • SaaS Continuity Escrow
  • Information and Document Escrow
  • Deployment Verifications Static Application Security Testing (SAST)

Suggested reading: Looking to invest in new software? Read our article, ‘Power Apps vs. SaaS vs. Custom Build: Which Solution is Best For Your Business?’, to discover your best-fit solution.

Grow your business with a secure software solution

Staying up-to-date with the latest developments in technology is essential to remaining competitive, growing your business, and meeting evolving compliance requirements. A software escrow agreement helps you ensure that your projects and work are protected, whether that’s in regards to general security or in the face of any setbacks.

Talk Think Do delivers custom software development services via Escrow London, supporting clients to invest more safely and securely. To learn more about our bespoke development services, book a free consultation today.

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