What is escrow and how does it work?
In: Economics
Yet another example, probably not what you’re thinking of. It’s called “software in escrow.” Say you have a software company and you’re a start-up. A customer wants to purchase your software but doesn’t trust that you’ll stay in business for long, since, as we know, most start-up fail. They don’t want to be lecft with zero chance of support. So as a part of the software purchase contract, they require you to put your source code into escrow. This means that you use a software escrow company and you put a copy of the source code to the software you sold to that customer into the hands of that escrow company. Then, if your company goes out of business, your source code is made available to that customer who purchased your system and they can at least support themselves.
I’ve encountered this many times, and it’s a PITA for the software start-up, packaging up the source code in a way that some random customer can build it for themselves.
Bottom line, your software source code is being held by a third party (you are the first party, the customer is the second party) in what is called an “escrow account.” So escrow isn’t just for money like in the other examples described here.
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