Decisions - Escrow - Held in trust.

(From Financial Director)

Byline: Malcolm Wheatley.

The phone call is brief, and unwelcome. A company that supplies software vital to your business has unexpectedly collapsed. The employees have been laid off and the empty premises are in the hands of a letting agent. The timing couldn't have been worse: with regulatory compliance requiring a software upgrade within the next two months, no one seems to know how that will be achieved. Such scenarios are the reason behind what are termed 'escrow agreements'.

Escrow, a legal term defined as "money, goods or a written document held by a trusted third party, pending the fulfilment of some condition", provides an assurance that should a software company go out of business, its customers won't be left in the lurch. The idea: the application source code, and all relevant documentation, is lodged with an escrow agent, who releases it should certain contractually defined conditions - such as the software company going out of business - occur.

About 10,000 British businesses are protected by escrow agreements operated by Manchester-based NCC Group, an offshoot of the National Computing Centre.

About two-thirds of these agreements, explains operations director Jon Leigh, comprise what are called 'single-form agreements', which are typically used when a software house creates some bespoke code for a company. The remainder are 'multiform agreements' set up by software applications vendors, to which any number of their customers can subscribe.

Prices vary according to how much protection is required, explains Leigh.