Source code escrow
Also called software escrow, code escrow.
An arrangement where a vendor's source code is held by a neutral third party and released to the customer if agreed events happen.
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What it is.
Escrow is used when a customer relies on software it does not own, such as licensed software or a platform the vendor keeps. The vendor deposits the code and build instructions with an escrow agent. If a trigger event happens, for example the vendor goes out of business or stops supporting the product, the agent releases the deposit to the customer.
When the customer owns the code outright through an IP assignment and holds the repository, escrow is usually not needed.
Why it matters
Escrow protects against being stuck with critical software nobody can fix. It is common in regulated sectors and in large licence deals, where a business cannot afford to lose a system overnight.
In a product build
For custom product builds, the simpler route is usually the client owning the repository and cloud accounts from day one, which makes escrow unnecessary.
Common mistakes.
- 01
Depositing code once and never updating it.
- 02
No build instructions or dependencies in the deposit, so the code cannot be run.
- 03
Vague release triggers that lead to a dispute exactly when the customer needs the code.
Related terms.
- IP assignmentThe part of a contract that transfers ownership of code, designs and other work from the people who made them to the client.
- Handover (software handover)Moving the code, accounts, documents and know-how of a product from the team that built it to the team that will run it.
- Vendor lock-inWhen leaving a supplier, platform or tool would cost so much time or money that you are effectively stuck with it.
- SLA (service level agreement)A contract that promises a level of service, such as uptime or support response time, and says what happens if it is missed.
