How Escrow Can Help Protect Your Business

Posted on Oct 22 2013 - 2:04pm by Editorial Staff


An escrow is an agreement between two transacting parties which involves an independent third party. The third party holds certain assets that can only be released when criteria set down in the contract are met. Typically this involves sums of money. A simple example is the security bond that is payable when you rent a property.

In the UK, if you rent your home on an assured short-hold tenancy, your landlord is obliged to place the bond in one of a number of recognised tenancy deposit protection schemes. At the end of the tenancy you will get the money back if you have met the terms of your tenancy agreement and the property is undamaged. Otherwise, the landlord may be entitled to some or all of the money. The bond is essentially held in escrow by a trusted and independent third party.

Software escrow works on a similar basis but instead of sums of money it is typically the software source code that is held by the escrow provider. Registry escrow, technology escrow and other types can help protect other types of technology asset.

So why is this important?

Many businesses these days rely on custom-designed software. It is essential for business continuity that this type of mission critical technology is protected. If the original supplier of the software goes out of business or is otherwise unable to maintain the software they provided, the consequences could be catastrophic.

Software developers and suppliers are generally fiercely protective of original source code and the intellectual property underlying their assets, and with good reason. That is their business after all, but your business, as licensees of the software, has to be able to ensure continuity. This is where an escrow provider comes in. They hold the relevant assets securely, ensuring that the material can be accessed and released to the user only in the case of the developer’s business failing or should they otherwise fail to maintain their contractual obligations.

Escrow solutions can also be applied to areas other than software. Registry Escrow provides protection for website domains, while technology escrow can provide protection of critical technology assets such as hardware and design documents.

Almost all businesses are reliant on some form of technology. It’s important to protect these valuable assets, and professional escrow services can help you do just that.

Photo Credit: Flickr/Bill Selak

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Editorial Staff at I2Mag is a team of subject experts.