Johannesburg, 04 Oct 2004
Many companies in SA may be unwittingly losing out on the protection afforded by an active software escrow agreement. Without this protection, the availability of the technology - or source code - behind their software programs may not be guaranteed, a position that places the continuity of their critical business processes at risk.
This is the claim of Escrow Europe director, Andrew Stekhoven, who argues that, in today`s technology-driven society, companies are increasingly dependent on software systems that do not `lock, stock and barrel` belong to them.
"In today`s business environment, companies are largely dependent on third-party knowledge - for example, the knowledge behind the system that manages a call centre like credit card authorisation, or tracking system such as those used by courier companies, or an accounting system like those used by the major retail chains.
"This dependence implies risk, particularly if the system is directly related to the core business process. In this instance, it is crucial to minimise the company`s exposure and escrow is the pre-eminent vehicle to do that," he said.
Software escrow provides for the deposit of the source code of a vital software product with a neutral third-party. This third-party is authorised to release the source to the end-user under conditions agreed upon by the supplier and end-user in the escrow agreement.
"Companies should opt for escrow because it guarantees availability and continuity of use of vital know-how as well as safeguards critical business process," said Stekhoven. "In addition, it protects software, hardware and industrial investments, and reduces dependency on third-parties or employees.
"Those businessmen who do not believe they need to invest in escrow should ask themselves a few of questions before closing the door:
* Is the technical or IT know-how I use everyday critical to my business processes?
* Is this know-how not easily replaceable by an alternative?
* Is the conversion to an alternative too costly or too lengthy?
"Then consider," for example, "the consequences the following events may have on the financial success, let alone continuity, of a business:
* The company that developed and now maintains one of your business-critical software applications becomes insolvent.
* The company that developed and now maintains one of your business-critical software applications is taken over by a competitor.
* A virus or hacker destroys business-critical operational software.
"Your natural recourse in these instances would be to invoke an escrow agreement, if you have one, and gain access to the source code so that you are able to maintain your software and keep trading.
"However, unfortunately most escrow agreements in SA are passive, meaning there is no guarantee that the source code released by the agent will be usable. This is where Escrow Europe can assist you."
Escrow Europe verifies, updates and retains deposits of source code and associated documentation. These are released to licensees when the developer (licensor) cannot continue its business. Unlike most escrow agents, Escrow Europe provides active escrow - deposits are verified to ensure that licensees may actually implement and successfully use the source code in the absence of the licensor.
Managing director of leading new age firm of attorneys Buys Inc, Reinhardt Buys, said recently that Escrow Europe has superb technology, tested systems and expertise. A team of specialists in Amsterdam verifies that source code deposits will actually work when released later.
Buys Inc and Escrow Europe are working together in SA to minimise companies` exposure to the risks our technology-reliant business world exposes us to. Their checklist for determining if a company would benefit from active escrow is reproduced below.
"The benefits of legal, properly licensed and protected corporate software use are many, including good corporate governance; proper risk management; eligibility for technical support, upgrades and security patches; and reduced costs and increased productivity," concluded Stekhoven.
If you believe your business is at risk, call Andrew Stekhoven andrew.stekhoven@escroweurope.com or visit www.buys.co.za or www.escroweurope.com.
Do you need active escrow?
If you have more than four `yes` answers to the following questions, your company may benefit from an active escrow agreement:
a. Our business uses third-party software (eg Microsoft) through licence agreements.
b. This software is critical to our daily operations and/or communications.
c A large number of employees or departments in our business rely on this software.
d. These software applications link with other missions critical systems or applications.
e. This software is customised for our business.
f. We use third-parties to update and maintain the software.
g. Time to replace the software and implement a similar solution will be longer than 30 days.
h. New hardware will be required if we need to replace the software.
i. We would not be able to operate, support and update the software should the owner or licensor fail to update and support it.
j Our licence agreements do not address active source code escrow.
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