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Software horror stories and escrow

We are talking to a potential client this week, who had bought a software package from a reputable software company around 18 months ago.  Unfortunately the supplier has gone into administration, so the client approached the administrators about buying the source code.  This would allow them to continue using the package, whilst sourcing a provider for technical support and ongoing changes.  The administrator said they could have the source code, but it would cost them several thousand pounds!  So what should you do and perhaps more importantly how do you avoid this happening to you?

Although this is an unfortunate situation, it isn’t easy to protect your business from suffering a similar fate!  When buying “off the shelf” solutions, there is little or no protection available.  You can even find yourself left out in the cold using open source software, if the project is abandoned by the development community.

In the late nineties I suffered a similar situation when a software vendor that specialised in software components " used by developers to build applications  " abandoned a specific product when the company was taken over.  In those days it wasn’t such a big issue as developers would provide the source code with the component (VBX / Active X components), but it still meant that we had to invest far more time than originally anticipated within the budget.

You can protect yourself when using a software house / web design studio to build you a bespoke system as long as you are aware of the potential issues. Web sites aren’t as difficult to protect as the source code is on your website’s server (which you should have access to) so you’ll be able to back up a copy of the HTML documents and graphic files; if in doubt, ask for a copy of the code and store in secure place.

Desktop systems present more of a challenge as these are often installed as compiled executable files (*.exe) and you don’t have access to the source code.  If you are commissioning a bespoke software solution, make sure you check the contract and ask the question " what happens if the software house ceases to trade (for what ever reason) " and make sure you get a straight answer.  You can ask for an Escrow agreement, if you aren’t satisfied with the provisions the software house suggest.

Source code escrow is the deposit of the source code of software with a third party escrow agent.  Escrow is typically requested by a party licensing software (the licensee), to ensure maintenance of the software.  The software source code is released to the licensee if the licensor files for bankruptcy or otherwise fails to maintain and update the software as promised in the software license agreement.
Source code escrow

Although this might seem overkill, it will protect your business.  Ayrmer Software will provide a copy of the source code for any of our projects, when requested and certainly don’t agree to the administrators point of view.  After all, you " the client " paid for the software to be developed.  You could always ask the developers to add a clause within their terms and conditions stating that " should the company cease to trade for any reason (including administration) the source code will be released free of charge " in fact, after hearing  the horror story we’ll be adding a clause to our standard terms that says exactly that.

Date: 26/10/2010

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