Software escrow is internationally accepted as best practice to manage the risks associated with exposure from third-party software providers. It is a customised legal agreement between the software developer, the user, and the software escrow agent. This safeguards the software source code and makes it available to the user in the case of clearly defined trigger events that threaten business continuity. Typically, the corporate entities bear the burden of addressing software dependencies and mitigating the risks to business continuity. However, Guy Krige, executive risk consultant at Escrowsure argues that software developers and start-ups also have a critical role to play. In a highly competitive arena, fintech start-ups that include software escrow in their go-to-market strategies show their commitment to safeguarding their clients’ digital futures and gain the upper hand over competitors.
Krige says, “Software developers entering into software escrow agreements offer a proactive solution to the risks associated with service disruptions. These agreements act as a safeguard against unforeseen circumstances such as vendor insolvency, acquisition, or the inability to maintain services. For start-ups competing for sales ascendency and funding, building resilience into software solutions becomes a key differentiator. By proactively embracing escrow agreements and ensuring compliance with evolving regulations, these software vendors not only enhance their value proposition but also gain a competitive edge when vying for new clients.” For 20 years, Escrowsure has been trusted by some of the world’s central banks, South Africa’s leading financial services and blue-chip corporates to mitigate software risk through flexible escrow solutions customised and specific to each unique business risk environment.
As the risks associated with increasing reliance on third-party software vendors reverberate across all sectors of business, there have been successive waves of new digital risk rules and regulations aiming at conserving business continuity and consumer protection. South African software developers and start-ups planning to gain local and global clients must be able to navigate and comply with regulations such as:
Many of these guidelines and regulations are expected to recommend software escrow as effective third-party risk management and vital components of business continuity plans.
Andre Symes, group chief executive officer at Genasys Technologies, a technology provider servicing the insurance industry says, “Our policy and claims administration software forms the backbone of our clients’ insurance operations. It is essential to the daily operations of our regulated clients and to ensure that claims get paid to the policy holders. As such having our software in escrow is not optional, but rather a necessity. Having a trustworthy escrow partner is no longer optional in today’s digital age.”
Krige says, “It is clear which way the wind is blowing, and in 2024 and beyond, we anticipate the ongoing introduction of additional regulations aiming to ensure businesses and consumers are protected from unexpected disruptions. It’s surely time for software developers and FinTech start-ups to have their finger on the pulse and to integrate software escrow into their business models.”
