What's "Source Code" why is it Escrowed?

Every single day, companies worldwide license and implement custom computer programs which might be critical for the operation of these businesses. Development and implementation can cost huge amounts of money. Since these applications are critical, software development and maintenance contracts often require the program developers to store the "source code" with the software and explanatory documentation in the escrow account. Source code will be the sequence of logical statements and operations designed in a human-readable computer programming language that controls the processing of web data as well as the functionality of software. The source code itself is usually millions of lines of code and it is normally designed and authored by software programmers in programming languages for example C++, Java or Visual Basic. When completed, the source code is compiled into "executable code" for download, installed and run on your personal computer. However, with merely the executable code, customers don't have any capability to observe the application is processing data or performing functions and, usually, haven't any chance to get a new operation on the software.

Because repairing problems or changing functionality is only possible using the source code, the escrow of source code is normal in large software transactions involving custom developed or operationally critical applications. Within a source code escrow arrangement, the source code and documentation are kept in escrow by a trusted 3rd party, the escrow agent. The source code and related documentation should be released upon the appearance of a "release event" for example software developer declaring bankruptcy or failing certain obligations beneath license.

Following a release event, the promise on the source code escrow is usually that the customer can buy the code to take care of the software program devoid of the original developer. This maintenance involves fixing bugs, ensuring compatibility to system upgrades and adding the functionality required in the customer's changing business.

Software maintenance is important to enterprise applications. As the customer lacks the assurance how the software developer will be around to execute software maintenance, and since such maintenance is not performed devoid of the source code, escrow is known as essential for certain software deals.