“I’m not even sure what I should be asking.” I hear this phrase all the time as an escrow advisor for Iron Mountain’s Intellectual Property Management group. My job is to guide individuals who have been tasked with establishing a software escrow account for their organization. Whether you’re in the role of software developer or licensee, whether your application is on-premises or in the cloud, uncharted territory is still uncharted territory. After participating in hundreds of these discussions, I’ve realized some considerations are almost universal. This post serves as a beginner’s guide for what to look for as you take the first steps in establishing a software escrow account. (Please note: these can also be called source code escrow or technology escrow accounts.)

If you’re confused about entering into an escrow agreement, you’re in a good company. It’s a foreign concept to many of the people I speak with, and while setup may at first seem daunting, rest easy. We’re here to help. In consideration of all the moving parts in the escrow process, let’s break it down into three overarching questions:

Why are we setting up a software escrow account?

How do we want the escrow account to work?

How do we know it is working as planned?

Why are we setting up a software escrow account?

What led you to this discovery session in the first place? If you’re a software developer, perhaps you’re simply looking to maintain a current copy of your application’s software source code (your intellectual property) in a secure location. Or, it could be to satisfy a request from a large organization or governmental entity that is evaluating the purchase of your software. If you’re entering an escrow agreement with the expectation of future clients having similar requests, your biggest consideration may be setting up a simple, repeatable process to streamline future requirements.

As a software licensee, the escrow may be a part of your overall risk strategy and continuity plan when you’re signing a license agreement with a startup or smaller developer organization. Escrow can also be a means to protect a large investment in a software application. For a licensee, an escrow agreement can help serve this purpose by providing leverage that would otherwise be lost when entering a business agreement with a vendor that is considered risky, whether this risk stems from organizational structure (small and inexperienced) or certain nuances in the market that the application supports (finance or banking).

How do we want the escrow account to work?

Regardless of your role in the escrow relationship, all parties should be aligned on expectations. This means having knowledge of the software release schedule so that the most recent and relevant version of the source code and supporting materials are held in escrow at any point in time. As a developer, this means having a plan as to when source code and documentation will be deposited, and how this will be achieved. Will it be mailed in physically, or is it best to upload the material electronically? Another focal point is related to escrow release conditions. In the event of A, B, or C, the licensee gets access to the deposit material. As a licensee organization, confirm that you have an understanding of how the deposit material will be released and how it will be delivered if an escrow release is required.

How do we know it is working as planned?

Once you’re up and running, it’s important to ensure that your escrow account is functioning the same way it was intended to when the account was initially created.

As a developer, chances are that your technology is being enhanced and refreshed as you add functionality. Updated deposits to your escrow account should coincide with these enhancements. As a software licensee, it is recommended that you build a specific deposit schedule into your agreement. This ensures all the materials in the escrow account are accounted for and up-to-date in case a release is needed, and perhaps most importantly, that all parties have a clear set of expectations to follow.

Another best practice is escrow verification. Escrow Verification Services offer insight into the composition of your escrow deposits and will validate all the pieces of your escrow deposit is both complete and usable in the event of a release event. When it comes to the ongoing management of the escrow account, I suggest using Iron Mountain’s online portal, called the Escrow Management Center. It functions as your single resource to access vital information and initiate any necessary changes with your account.