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 in force throughout the term.
As software / SaaS companies grow they often encounter a few new escrow requirements each year. Over time many software / SaaS companies accumulate 5-10 or more active escrow agreements. Each agreement has a unique escrow deposit or deposits. Typically each escrow deposit has to be updated every time there is a material change in the software.
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development, modern agile software practices virtually guarantee that virtually all escrow deposits using these outdated methods are outdated.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:
- Strategy – Typically software / SaaS companies are reacting to specific client requests to win new business when they set up their first few escrow agreements. This approach often leads to each escrow agreement being unique and in some cases even multiple different escrow agents being used. This can lead to confusion, administrative difficulty and inefficiency. A move to PRAXIS will allow clients to take a more strategic approach to meeting escrow requirements in a far more efficient manner. Often, existing escrow agreements can be consolidated under one master agreement to eliminate costs and streamline administration.
- Eliminate Internal Engineering Costs – Escrow fees are nominal when compared to most enterprise license or subscription sales. However, supporting escrow agreements 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 require several hours of engineering time 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.
- Reduce Legal Costs – Negotiation of enterprise software license and SaaS subscription agreements can take considerable time, often up to 12 months or more. Adding a custom software escrow agreement with each license agreement can add a significant time burden to an already busy internal legal team or add significant legal fees for those software companies using outside counsel. Putting in place a strategic agreement with PRAXIS can provide software and SAS companies with a tool to use for current and most future escrow requirements which can reduce time and costs related to meeting escrow requirements.
- Reduce Escrow Costs – PRAXIS provides excellent value and competitive pricing with our ALL INCLUSIVE pricing. In addition, consolidating existing escrow agreements under one more flexible program can reduce escrow fees significantly without needing to renegotiate escrow terms.. PRAXIS is very experienced in helping software companies consolidate multiple escrow agreements after years of growth, following an acquisition or as part of cost savings measures.
- Better Protect IP – Having an escrow agreement in the first place can help software companies protect their intellectual property by keeping their IP safe with a neutral third party and yet giving their clients peace of mind that they can run the application should the vendor fail. In addition, having all of your intellectual property stored with one escrow agent can provide peace of mind knowing that your IP is in a limited number of places and is well protected by a SOC 2 compliant software escrow agent.
PRAXIS strives to be the most efficient escrow provider in the industry. We invented the Automated Escrow process to help keep up with the speed of agile software development, we provide highly customizable solutions to meet specific needs and we can handle nearly 100% of the details of your transfer.
To calculate the time and money you can save by transferring to PRAXIS please visit: