What is Escrow Arrangement?

An escrow arrangement works like a vault with a notary: the supplier periodically deposits the most recent version of the source code with the escrow agent. As long as everything is working normally, the vault never needs to be opened. But if the supplier ceases operations, becomes insolvent, or discontinues support, the buyer has the right to retrieve the source code and continue maintenance through another party.

Escrow is relevant for software deeply integrated into business processes where no easy alternative exists. In the hospitality sector, this applies to Property Management Systems, point-of-sale systems, reservation platforms, and integrated invoicing systems. If a PMS supplier disappears without an escrow arrangement, the buyer is completely dependent with no means of escape.

A good escrow arrangement covers at minimum: the definition of what is deposited (source code, documentation, configuration data), the frequency of updates (with every new release, at least annually), the release conditions (when can the vault be opened?), and the allocation of costs (who pays the escrow agent?).

Escrow is not necessary for all software. For standard SaaS tools with many other users, the risk of complete disappearance is lower and alternatives are usually available. For niche software or bespoke systems, the risk is greater and escrow is a serious consideration.

Software dependency is a real risk for SMBs. A supplier who disappears without an escrow arrangement means losing access to a system you depend on daily — one that cannot simply be replaced.

An escrow arrangement is a relatively low-cost form of insurance for mission-critical software. The question is not whether you need escrow, but whether you have arranged it before you actually need it.