African Software Escrow Firm Achieves Global Recognition
African Software Escrow Firm Achieves Global Recognition
Escrow Europe (Pty) Ltd, the only independent South African technology escrow provider to concentrate solely on active software escrow, has been selected by Microsoft as one of the featured escrow companies for the Certified for Microsoft Dynamics (CfMD) program.
This makes Escrow Europe (Pty) Ltd one of only seven software escrow companies, worldwide, to achieve international Microsoft recognition. Furthermore, the company is the only escrow firm on the African continent selected to provide software escrow services to assist Microsoft Independent Software Vendors (ISVs) to achieve their CfMD accreditation.
The business case for technology escrow
Given the pervasiveness of technology within today's organisations, businesses are often entirely dependent on software over which they have limited or no control and which could become orphanware' in less time than it takes to log on to Google.
Orphanware is software that is no longer supported by the company that developed it, and can come into being for a number of reasons ranging from the obvious for instance, bankruptcy on the part of the supplier to the more subtle for example, a competitor acquires the supplier with the sole purpose of killing a competitive product.
One way to mitigate the operational risk associated with dependency on software that the company does not own is for the company to purchase a source code licence. Unfortunately, this situation is usually actively discouraged (usually via an outrageously high licence fee) by the developers because it gives the purchasing company direct access to the secret code' in which the application is written.
An alternative with far more appeal is for both parties to enter into an active escrow agreement.
According to Wikipedia, "source code escrow is the deposit of the source code of software with a third party escrow agent. Escrow is typically requested by a party licensing software (the licensee), to ensure maintenance of the software. The software source code is released to the licensee if the licensor files for bankruptcy or otherwise fails to maintain and update the software as promised in the software license agreement."
This release of the source code allows the licensee the customer company to carry on using the software irrespective of the supplier's stability or commercial stability.
Gartner takes this one step further and describes escrow as a "smart and effective component of a business continuity strategy designed to protect mission critical applications in an ever-changing environment".
Today, software suppliers and developers, worldwide, are recognising that:
active escrow is a stamp of quality for demonstrating commitment to their clients in respect of their company and product;
their client's need for active escrow is perfectly legitimate as the arrangement deals with mission critical software that requires additional continuity of use warranties.
Many software houses are already using active escrow for competitive advantage in this respect as they have found that the escrow arrangement helps them to acquire more business, more quickly this will most certainly be the case when it comes to the value proposition for CfMD business solutions.
Microsoft's position on escrow
Microsoft has set the bar high by developing the Certified for Microsoft Dynamics accreditation - http://www.microsoft.com/en-us/dynamics/partners-certified.aspx. It sets apart a group of proven, packaged, repeatable business solutions that have met certain rigorous requirements to help protect the end-users investment now and in the future, and specifically includes software escrow in order to ensure the ongoing use of the technology as a business continuity and operational risk management measure for the end-user of the CfMD business solution.
Microsoft had stipulated that, with effect from November 1, 2010, all ISVs must escrow their source code to achieve the CfMD certification. By providing these services, Escrow Europe (Pty) Ltd is able to assist Microsoft's ISVs with meeting the requirement while protecting their intellectual property as well as the interest of their customers.
For the South African ISV that qualifies for CfMD, the escrow protection service provided by Escrow Europe (Pty) Ltd is further evidence that the business solutions they offer have been tested and approved for Microsoft's highest standards for partnership. Internationally, the Microsoft stipulation is that ISVs providing CfMD solutions must place their source code into escrow with a trusted neutral third party source code escrow firm.
In addition, the ISV must:
set up an escrow agreement for multiple licensees or users to become beneficiaries to the escrow;
identify the escrow agent on the user's validation checklist and send proof of their signed escrow contract to msdynamics@veritest.com for validation. However, in South Africa and elsewhere on the African continent, the ISV does not have to send a copy of their contract if they choose to use Escrow Europe (Pty) Ltd;
keep the source code agreement in force as long as the ISV markets its solution with the CfMD logo
ISV licensed end-users (licensees) can be added as beneficiaries of the escrow arrangement at a later date, at the discretion of the licensee and the ISV partner.
The motivation is that, as CfMD is Microsoft's highest level partner solution accreditation, Microsoft wants to provide further assurance to customers that they make a good choice when deciding to deploy a CfMD solution. This also enhances the value proposition of the solution as provided by the CfMD Software Vendor.
Escrow Europe (Pty) Ltd, which is one of the world's first software escrow companies to achieve ISO 9001:2008 quality certification, is the only BEE certified provider of active software escrow in South Africa, and consultant on software escrow to the Institute of Directors in South Africa and Judge Mervyn King.
Managing director of Escrow Europe (Pty) Ltd, Andrew Stekhoven, is delighted with the recognition from Microsoft Dynamics. "To be recognised by Microsoft on a global platform is a very important milestone and privilege for Escrow Europe (Pty) Ltd," he said.
"It not only highlights the significance of active software escrow as a tool for assuring a company's business continuity, it underlines our position as a leading service provider on the African continent. We thank Microsoft Dynamics for recognising us in this way and look forward to proving our worth in the months and years ahead.
"From an operational risk perspective, Microsoft has recognised that an active escrow arrangement can provide proper re-assurance that a Certified for Microsoft Dynamics business solution that is vital to the survival of the CfMD clients business will not become orphanware. In South Africa, as a director of Hollard so succinctly put it for us, the need for active escrow protection as a cost effective part of proper operational risk management makes perfect business sense," added Stekhoven.
Relevance in South Africa
To stay in business, most South African organisations are often entirely dependent on software over which they have limited or no control; without an escrow agreement they will very seldom have access to the source code of the product. This is a major problem that otherwise could present itself only once it is too late to take action.
From an operational risk perspective, an active escrow arrangement therefore is the only practical way whereby access to maintainable information systems, by the software end-user, can be guaranteed:
irrespective of the stability or commercial status of the software supplier;
if certain predefined commitments such as warranty, support and maintenance are not honoured.
In South Africa, risk management officers and internal audit practitioners are now asking "what are our annual revenue values that are dependent on information technology platforms over which we have little or no control?"
To a large extent, this concern is being driven by the recent King III recommendations; the preface of which states:
"Information systems were used as an enabler to business, but have now become pervasive in the sense that they are built into the strategy of the business. The risks involved in information technology (IT) governance have become significant.
We therefore deal with IT governance in detail in King III for the first time. There is no doubt that there are operational risks when one has a service provider because confidential information leaves the company. In IT governance, one seeks confidentiality; integrity and availability of the functioning of the system; possession of the system, authenticity of system information; and assurance that the system is usable and useful. Concerns are unauthorised use, access, disclosure, disruption or changes to the information system."
Active escrow addresses this area of ICT operational risk and it is representative of what is driving licensed technology end-users to request an escrow arrangement from their suppliers (licensors) for such technology (primarily software products) on which their mission critical business processes and functions absolutely depend.
ends
Note: All product and company names herein may be trademarks of their registered owners.
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