When SaaS was a new technology, software escrow was a popular inclusion in contracts. Is this is still the case? Should source code escrow exist in contracts between licensors and licensees?
What is escrow?
Normally you do not own or have any rights to the software (including source code) that you are accessing, under the terms of a regular SaaS agreement. This does not usually become an issue until technical problems start to arise, i.e. unexpected service interruptions, downtime, loss of application functionality and loss of data. This can add significant costs to your business and you remain reliant upon the software supplier to resolve these issues, unless you have an escrow agreement in place. Escrow is when the software source code is held by a third party – an escrow agent – on behalf of the customer and the supplier.
How does it work?
The software provider gives all of their code to a third party and if the provider goes out of business, the third party releases the software to those with an existing escrow agreement. So the theory is that you can set up your own servers to run the software - but the reality may be very different!
