| When is Software Escrow not appropriate? |
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Intellect Enterprises is committed to delivering best value to you and your clients. As a result, we are prepared to turn away business if we do not think taking our software escrow service would deliver best value. In recent times "software escrow" has become a buzz phrase in software contracts. However, as the market has expanded, software escrow has been, at times, oversold. In certain circumstances, software escrow is not appropriate (either wholly or partially). For example: • Low value software where transition to a competitive software application is low cost and convenient. In this case, the cost of simply switching suppliers is typically going to be much lower than the cost of the user attempting to support the software itself with the source code. • Hosted software (including application service providers, or ASPs). Where a user receives "software as a service" or accesses the software remotely (e.g. via the internet through a web-browser), there is an additional complexity associated with bringing software maintenance in-house, namely the user needs to switch from a hosted model to a local model, which will involve investments in technical infrastructure, as well as reconfiguration (and potentially some re-writing) of the software. As a general rule, hosted software "access fees" tend to be lower than local software "licence fees", and therefore the low value / easy to switch consideration (above) is also relevant. • Complex system integration, managed service, or outsourcing contracts where one party (the "prime contractor") takes responsibility for developing, implementing, and managing a software solution that encompasses a wide estate of third party software applications. In these instances the third parties are rarely willing to deposit their source code in escrow (if they agree, it will be a Staggered Contract [link to table]). Unless all third parties deposit the code, the user receives little or no benefit from the service. 50% of the source code of the total solution delivers only 1% of the value to the user. In addition, even if all third parties have agreed to deposit code, the user needs to consider the costs of attempting to manage multiple sophisticated and interoperable software applications against the cost of re-tendering the services and appointing a new supplier. A user may take the view that software escrow "is worth asking for, even if it is not entirely appropriate". We disagree. If users are paying the fees themselves, they may be wasting money. If the owner is paying the fees then the user will be paying indirectly through licence fees or maintenance fees. |