Summary: This guide explains the cost and process of software escrow services, highlighting its importance for securing intellectual property. It covers the cost breakdown, parties responsible for payment, and legal terms of escrow contracts. Learn about various account types and how to manage fees effectively.
Software services are a mainstay for all industries and for businesses large and small. According to SpiceWorks, companies spend $1 on software to every $8 spent elsewhere.
But how can a customer be sure that their data is safe after they’ve agreed to hand it over? That’s where software escrow steps in as a neutral third party. Your escrow agreement acts as a type of insurance for both the title company and the licensee. The goal is to mitigate risk due to an unforeseen event.
Escrow is clearly a crucial way to preserve your mission-critical data, but it also requires an investment. How much does escrow cost per month, and is it worth it?
In this guide, we’ll explore how much an escrow service costs and why it may be a worthwhile investment for your business. Continue reading to discover the answers to the top questions about software escrow costs today.
What is the Process of Software Escrow?
First, the developer or software vendor provides the escrow agent with the latest version of the source code. Under the contract, the developer must continually update the information periodically. If conditions set out by the licensee are not met, the data is released. At that time, it will be current and ready to use.
Meanwhile, the escrow agent will perform integrity tests as part of the source code deposit. This ensures the data is free of viruses. Likewise, it verifies that the deposit is accessible for the licensee if they need access.
How is Software Escrow Pricing Calculated?
The benefits of software, also known as source code, escrow are abundant. They range from intellectual property (IP) security to a failsafe if a software company dissolves. With this type of legal support, there must be a catch right?
Enter: Escrow service fees.
Escrow fees are part of maintaining the escrow account. Software escrow pricing includes software updates and security testing.
The cost of an escrow account and IP protection fees also depends on the number of beneficiaries.
Types of escrow accounts include:
- Three-party source code escrow agreements. Used when an individual is licensing software developed from a software company directly. The client has the ability to view the status of the software at any time.
- Multi-beneficiary source code escrow agreements. Established by the software business for their clients. It’s usually a feature of their service to provide peace of mind.
This type of account allows for an unlimited number of beneficiaries. It ensures the software is well-maintained and accessible.
These different levels of access weigh heavily on how much software or source code escrow costs.
Who Pays for Software Escrow?
Which party is responsible for paying for the set up and maintenance of the escrow agreement?
That depends on the parties involved.
For example, a large enterprise may want to provide escrow service to all their customers as a bonus. In that case, the business would pay the setup and yearly fees.
However, sometimes a smaller business’ customer asks for an escrow agreement. In that case, the software vendor could negotiate the price of the agreement to secure the sale.
That is not the only option, however. They could pay for it outright, or the licensee could be charged for wanting the agreement. This is up to the parties involved.
When a licensee pays for the agreement, there is more attention on the details of the contract and deposit schedule. As the customer continues to work with the vendor, they may monitor the escrow deposits more closely. That way, they’re not surprised if the vendor starts to experience financial setbacks.
Escrow agencies like EscrowTech will likely provide a portal for licensees to monitor for source code updates. This ensures the contract is being followed.
Software Escrow Contract Legal Terms
The goal of the escrow agreement is to protect the licensee if something happens to the software vendor. If the licensee is paying for the agreement, the contract should reflect this. It will typically state that the developer is held accountable for any lapse in updates to the software.
How disputes and payment terms are handled should be laid out in the escrow document. Disputes should be handled between the licensee and the developer team. The escrow agent can only provide maintenance to the escrow. They do not serve as a legal advisor to either party.
How Much Does an Escrow Service Cost?
The question on everyone’s mind now is how much escrow costs per month. At EscrowTech, the setup fee of $995 is always the same. That’s the case no matter how many beneficiaries are on the escrow account.
Any additional fees include:
- 2 cubic feet for Deposit Materials storage.
- Excess Storage Charges of $70 for additional space per year per cubic foot.
- Release fees to a beneficiary are $250 when the contract conditions are not met.
- A File Listing includes four deposits a year for $595 annually.
- The Multiple Beneficiaries option allows a source code owner to offload some of the costs to the licensees. This is possible if there are 2 or more eligible individuals on the account.
- Separated products with custom add-ons will incur additional costs. Fees are based on how many beneficiaries are included and which products you choose to include.
At EscrowTech, we’re happy to help you find the plan that works best for your budget and needs. Personalizing your escrow agreement can mean both happy customers and secure IP.
Is it Possible to Lower an Escrow Payment?
Lowering your annual escrow payment will depend on whether you’d like to remove some of the services. You can update your software escrow online through our customer portal. You can also make updates by mail or through courier service.
For more information on our pricing or to get started, contact us today.