What is SaaS escrow?

As software shifts away from the traditional on-site licensing model, SaaS and other cloud escrows are becoming increasingly more important.

For all intents and purposes, SaaS escrow is similar to a regular software or source code escrow; however, it is tailored to the unique needs of Software-as-a-Service (SaaS) applications, which often require a more robust solution to obtain a required level of protection.

Much like software escrow, SaaS escrow is an agreement set up between a software developer or vendor (aka “Depositor” or “Licensor”), their client who is purchasing a software license (aka “Beneficiary” or “Licensee”), and a trusted third party (“Escrow Agent”). Materials deposited in SaaS escrow may contain code, virtual machines, data, and any other components necessary to ensure the SaaS product remains viable in the event the original vendor is no longer able to support it.

By establishing a SaaS escrow agreement, the beneficiary protects itself from a potential sudden loss of access to critical SaaS services—whether temporary or long-term—and secures direct access to a running copy of the software and their own customer data in case certain predefined release conditions are met. Such conditions typically involve the licensor discontinuing maintenance and support of the software, running out of business, or breaching the contract in any other way.

If any of these (or other) predetermined events occur (each, a “Release Condition”), the escrowed materials (i.e., source code, credentials, build instructions, etc.) are then made available to the beneficiary so they can ensure their operations go on uninterrupted regardless of the operational status of the licensor’s company.