Software Escrow Agreements

A software Escrow Agreement between you and your EHRS vendor may help ensure, in certain situations, that you get a copy of the source code so that you can—at least in the short term—maintain your mission-critical EHRS. It is not, however, a simple solution, not your best solution in the event of lapse in EHRS support.

What Is Software Escrow?
Software escrow means deposit of the software's source code into an account held by a third party escrow agent. Escrow is typically used to ensure you have maintenance continuity of the software in the event of an EHRS vendor business interruption or closure. The software source code is released to you, if the vendor files for bankruptcy or otherwise fails to maintain and update the software as promised in the software license agreement. Typically the vendor will pass the cost of the escrow account to you, although I believe that it is a cost of doing business and they should pay these costs.

Some vendors simply bypass this process and cost, and will agree to provide you with the source code directly, on an ongoing basis.

What Is Software Source Code?
Source code is the software's programming code represented in a particular programming language that can be modified in the same language. The source code gets compiled into object code, which is the code you use to run the application. Object code, in general, cannot be modified.

How Would We Use This? Is This Really Helpful to Us?
The source code is only useful to you if:

• You have the staff/resources with the programming skills to modify the application
• You have the right modify the application
• The code has been appropriately documented, within the code,
• You can afford the programming services
• and the escrow company actually has the latest version!

Scenario:
Say your vendor goes "belly-up" and you cannot reach them for support and transition. You find a problem/bug in the software and need a fix right away or your payor changes a compliance rule and the application requires custom programming to comply. If the contract allows, you will be given a copy of the "current" source code to modify.

Now you need to either hire or engage a programmer with the appropriate programming language skills (you can see here why it is important for your EHRS to be written in a standard programming language and that it uses an industry standard database). This programmer reads through/studies the code and code documentation (many software vendors struggle to keep their code documented in a way that a programmer who is unfamiliar with the program can get up to speed quickly, many don't bother or don't keep it consistently updated). Your programmer must trouble shoot the issue and write/test the fix. This sounds much easier than it will be and you can imagine the potential cost.

You can see from this simple example, that your best approach to vendor issues is not necessarily to get your hands on the source code!

It might be comforting to know that escrow release of code is very rare, about 0.18% of the time.

While it is rare for source code to be released from escrow, your agreement should have specific situations spelled out for release. The most common condition for releasing code is when a vendor stops supporting its software, often as a result of going out of business. Hire an attorney with experience in software contracts. Assure that the escrow language does not inappropriately limit your use of the source code. Consider all situations, for example, when the vendor does not file for bankruptcy, but simply ceases to exist. What about when a vendor shifts away from a mature product in favor of one with more market potential, and they simply declares 'end of life' for your product. More likely scenarios in the Behavioral Healthcare industry are mergers or acquisitions by another firm. What if the new firm chooses not to honor your support contract? What if the vendor defaults on your service contract?

In any situation, if the vendor continues to provide adequate maintenance to you as agreed, there is no reason to justify release of the source code. The escrow will more likely serve as the vehicle to allow both parties to arrive at a solution that serves their best interests without releasing the source code.

by Keely McGeehan, Sahara Management Solutions, Inc.