The Costs for Software Protection Services ~ No Free Lunch.

The free-market economist Milton Friedman popularized the phrase “there is no such thing as a free lunch”.  The same theory applies when establishing a Software Escrow Arrangement.

Remember the reason(s) for establishing a Software Escrow Arrangement … with access to the Technology Vendor’s source code, a Licensee can maintain and enhance the software in the event that an unanticipated and/or catastrophic occurrence does not permit the Technology to continue its operations.  As mentioned in a prior entry, an escrow account is similar to that of taking out an insurance policy in order to safeguard the rights you have to a licensed product [software protection services].

Investing in a Software Escrow Arrangement may not be a priority to your organization if you can easily swap out the “now defunct” vendor’s IP with another vendor’s solution.  However, it’s another story when the “now defunct” vendor’s solution is responsible for a mission-critical application installed and implemented in your environment. As it relates to this scenario, the cost of establishing an Escrow Arrangement is minimal compared to that of installing & implementing another vendor’s solution.

The good news is that most trusted, neutral third-party providers of Technology Escrow Services will prepare a professional price quote clearly identifying/detailing the fees associated with their Services.  Having that knowledge, your organization can then make a decision whether or not an Escrow Arrangement makes financial sense, relative to the cost associated with replacing a “now defunct” vendor’s solution with another.

Software Protection Services and associated fees

The fees quoted by most trusted, neutral third-party providers of Technology Escrow Services will correspond to the type of Escrow Arrangement that you want to establish. . . which happens to coincide with your business needs.

  • Are you a Technology Vendor licensing software to one Licensee?

If so, your need for establishing a Software Escrow Arrangement may be dictated by a Licensee who is interested in licensing your software, but desires to protect their investment, in the event that your business plan does not support providing the source code to them.  If that is the case, the company that you choose to open your source code escrow account can address this need by offering a “Single Beneficiary” Escrow Arrangement.  In theory, this is a 3-party Escrow Agreement that is established by the Technology Vendor, the Licensee (“Beneficiary”) and the Escrow Agent.

The fees associated with this type of Escrow Arrangement will range by Provider(s); however, most fee schedules of neutral, third-party providers of Technology Escrow Services will document fees similar to those below:

  •  1st Year Technology Vendor Fee
  •  1st Year Beneficiary (Licensee) Fee
  •  Annual Renewal Technology Vendor Fee
  •  Annual Renewal Beneficiary Fee
  •  Update Fee
    • This fee is associated with each deposit made after the initial deposit. 
  •  Release Request Fee
    • This fee is associated with a Beneficiary’s (Licensee’s) request for Release of Escrow Materials. 

Are you a Technology Vendor licensing software to multiple Licensees?

If so, you may elect to establish a unique 3-party Escrow Agreement for each and every Licensee.  A different approach however, is to establish a Master Source Code Escrow Agreement for all of your Licensees.  The company that you choose to open your source code escrow account can address this need by offering a “Multi-Beneficiary” Escrow Arrangement.  In theory, this is a 2-party Escrow Agreement that is established by the Technology Vendor and the Escrow Agent and permits you to enroll multiple Licensees (“Beneficiaries”) to the one, universal Escrow Agreement.

The fees associated with this type of Escrow Arrangement will range by Provider(s); however, most fee schedules of neutral, third-party providers of Technology Escrow Services will document fees similar to those below:

  •  1st Year Technology Vendor Fee
  •  1st Year Beneficiary (Licensee) Fee (for each enrolled beneficiary)
  •  Annual Renewal Technology Vendor Fee
  •  Annual Renewal Beneficiary Fee (for each enrolled beneficiary)
  •  Update Fee
    • This fee is associated with each deposit made after the initial deposit. 
  •  Release Request Fee
    • This fee is associated with a Beneficiary’s (Licensee’s) request for Release of Escrow Materials. 

Are you a Licensee with an Investment to secure?

If so, you may elect to establish an unique 3-party Escrow Agreement for each and every Vendor whose software you license.  A different approach however, is to establish a Master Source Code Escrow Agreement for all of your vendors’ Intellectual Property.  The company that you choose to open your source code escrow account can address this need by offering a ”Multi-Vendor” Escrow Arrangement.  In theory, this is a 2-party Escrow Agreement that is established by the Licensee (“Beneficiary”) and the Escrow Agent and permits you to enroll multiple Technology Vendors to the one, universal Escrow Agreement.

The fees associated with this type of Escrow Arrangement will range by Provider(s); however, most fee schedules of neutral, third-party providers of Technology Escrow Services will document fees similar to those below:

  •  1st Year Beneficiary Fee
  •  1st Year Technology Vendor Fee (for each enrolled Vendor)
  •  Annual Renewal Beneficiary Fee
  •  Annual Renewal Technology Vendor Fee (for each enrolled Vendor)
  •  Update Fee
    • This fee is associated with each deposit made after the initial deposit. 
  •  Release Request Fee
    • This fee is associated with the Beneficiary’s (Licensee’s) request for Release of Escrow Materials. 

Summary

The decision to invest in an Escrow Arrangement is dependent upon the cost(s) associated with replacing a “now defunct” vendor’s IP solution with another. The good news is that most trusted, neutral third-party providers of Technology Escrow Services will prepare a professional price quote clearly identifying/detailing the fees associated with their Software Protection Services.  Having that knowledge, your organization can then make a decision whether or not an Escrow Arrangement makes financial sense, relative to the cost associated with replacing a “now defunct” vendor’s solution with another.

Source Code Escrow Report

Free Report

 

National Software Escrow, Inc.

8225 Brecksville Road, Building Three, Suite #105 Brecksville, OH 44141

PHONE: (440) 546-9750 FAX: (440) 546-0207

Email: [email protected]

 

For more information contact us!

source code escrow agreement

Share This