Software and SaaS companies that offer business critical technologies often encounter “software escrow requirements” when pursuing new, enterprise clients. Software escrow agreements are a form of contingency plan that larger corporations use to protect their business critical software applications. An escrow can provide access to a running continuity site, data back ups, source code, documentation and other information to help the end user continue to utilize the software or SaaS application if the vendor fails or goes out of business. This 40 year old industry has helped many small software companies win their early enterprise clients.
Software and technology escrow agents are neutral third parties that help software and SaaS companies protect their IP while still meeting the end user’s escrow requirement. These agreements are traditionally negotiated along with the license or subscription agreement and typically remain inforce throughout the term.
Historically, software escrow providers have been low tech, service businesses that more closely resemble a law firm or insurance agency than a technology service provider. Thus, methods for depositing or updating software escrow deposits have been low tech as well. The vast majority of escrow deposits in existence today were deposited on magnetic media like a hard drive, CD or DVD. In the past ten years or so some escrow providers have begun to accept deposits via FTP. While this “snapshot” or “static” escrow deposit methodology may have worked in the days of waterfall development, modern agile software practices virtually guarantee that virtually all escrow deposits using these outdated methods are outdated.
PRAXIS recognized the nearly ubiquitous move to agile development methods and in 2016 launched PRAXIS and introduced the world’s first automated escrow depositing solution. With PRAXIS software and SaaS companies can “set it and forget it” when it comes to making their escrow deposit and subsequent updates. This method virtually guarantees escrow compliance and helps boost your bottom line by:
- Increasing Sales – Many corporations would like to take advantage of early stage software and SaaS companies to gain a competitive advantage but are weary because the startup may be unprofitable, venture back or both. Having a robust software escrow solution for their protection included in your presentation can level the playing field and help you win more enterprise clients.
- Eliminate Internal Costs – Escrow fees are nominal when compared to most enterprise license or subscription sales. However, supporting an escrow agreement can put a significant internal burden on a software / SaaS provider. Most escrow agreements require “updates” to escrow deposits anytime there is a “material change” to the source code. In most agile development environments this can mean that escrow updates should be made weekly or even more frequently. When you consider extracting source code from the code archival system, aggregating build documentation, preparing escrow deposit documentation, coordinating FTP resources with the escrow agent and more this burden can be several hours each month or more. As the software company grows and has more escrow agreements to support, the internal costs of supporting the escrow agreements can grow exponentially. It is not uncommon for fast growing software / SaaS companies to have a full time employee dedicated to updating the software escrow deposits.
- Eliminate Incidental Costs – Depending upon how a software / SaaS provider makes their escrow deposits, the savings from incidental costs can be significant as well. Believe it or not, some escrow deposits are still made on physical media (i.e. hard drives, DVD, CD & etc.). While there are good reasons for this approach (i.e. data size is prohibitive for electronic transfer, security & etc.) making physical deposits adds significant time, material costs and shipping costs. Again, the more escrow accounts a company has the more significant the savings can be through Automated Escrow.
PRAXIS invented the Automated Escrow process to help keep up with the speed of agile software development and dramatically improve the quality of escrow deposits and thus the value of software escrow agreements. However, the automation also provides our clients with significant savings as a benefit.
To learn more about PRAXIS or calculate your software or SaaS escrow fees please visit: https://praxisescrow.com/software-escrow-pricing-calculator/