Castler Escrow

Software Escrow - Everything You Need To Know

Predictions assert that the software industry will grow at a phenomenal rate by 2025. With the IT industry on an exponential rise, the need for exchanges relating to codes, and software documentation is bound to multiply. On the flip-side, businesses have been facing constant shocks due to external factors (such as COVID-19). For ensuring transparent transactions, a rise in the need of software escrow is foreseeable.
What is Software Escrow?
Software escrow is a service that ensures secure agreement-based transactions of source code, data, and documentation. In brief, the process involves forming an escrow agreement between the transacting parties, opening an escrow account, and declaring it complete only when all parties are satisfied with the outcome.
Why Do You Need Software Escrow?
A software escrow is needed when a software developer and an end user (the beneficiary), feel the need to protect their interests in a transaction. To do this, they open an account with an escrow agent. This agent is a neutral third party responsible for ensuring that the transaction is processed according to the mutually agreed terms.
A digital software escrow solution is optimum for each party involved in such a transaction due to multiple benefits. The rampancy of software frauds is blatant, and this is precisely why there is a trust deficit between transacting parties. Escrow solves this issue flawlessly. 
Software developers benefit from escrow by safeguarding the payment due to them for developing softwares. Depositing the payment in escrow before the service is rendered assures developers that they will duly receive the payment. Consequently, this eliminates the ambiguity of non-payment or payment disputes for developers.
Along a similar tangent, end users benefit from software escrows as the payment is released to the developer only if the user is satisfied with the codes.
With more and more businesses focusing on automating systems, the use and need for software solutions are gaining exponential traction. Software is a major necessity for online businesses today. This calls for a transaction mechanism that helps ensure that the delivery of source codes and other documentation is proper and well-monitored.
Benefits of Digital Software Escrow
  • Secures Your Money – The user can deposit the developer’s payment in an escrow account, which means the money will be released only when both transacting parties agree.
  • Quick TAT – Setting up a traditional bank software escrow can take weeks to process. On the contrary, setting up a digital escrow account merely takes a few minutes. In addition to that, real-time updates allow you to be more aware of the status of different transactions you make.
  • Dispute Resolution – In-case of a dispute between the end user and the developer, the codes and the payment are securely held in escrow till the parties arrive at a resolution.
Related Concerns (and how to tackle them)
  • Problems about software build and operation – There is a possibility that sometimes, the developer supplies a source code that the end user is not able to use. Not all firms and individuals have the resources required to resolve this problem. Many times they end up hiring a professional who can make proper use of the source code that the developer provides.
Solution – Clauses related to use and build of the source code can be added to the agreement for convenience. Conditions such as provision of program-building service (and other legacy support services) can be stipulated. The problem is resolved if the developer agrees.
  • Problems related to updates – Sometimes, there may be issues regarding outdated source codes that are incompatible with the end user’s software. This problem normally occurs when the source code deposited in the escrow is withdrawn after a long time. Meanwhile, the end user’s software might undergo some updates.
    • Solution – You can add a clause mentioning that the source code should be up-to-date and compatible with the end-user’s software at the time of escrow closure to the agreement. In-case of any such changes to the source code occur, both parties will be updated about the change in real-time. This also adds greater transparency to the process.
    Fast, Secure, and Easy
    Opening a digital escrow account today is incredibly convenient, cost-efficient, and fast. With a rapidly increasing trust gap among businesses, escrow is increasingly becoming a necessity.
    Escrows are especially useful for software and source-code transactions as all parties involved in the transaction are able to reserve their dues. This leads to a flawless transaction experience, and disputes can be resolved without any stakeholder suffering at the expense of the other. This transaction ease and convenience makes escrows an exceedingly attractive transaction solution for developers and end-users alike.

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