Software escrow is when you place your source code in the hands of a trusted third party. The trusted third party then has the right to release your source code to the other party when certain conditions are met.

The reason companies require source code escrow is to protect themselves if they buy your software. Once they buy your software, your customer is making an investment and they need to have the ability to continue to adapt an...

Software escrow is when you place your source code in the hands of a trusted third party. The trusted third party then has the right to release your source code to the other party when certain conditions are met.

The reason companies require source code escrow is to protect themselves if they buy your software. Once they buy your software, your customer is making an investment and they need to have the ability to continue to adapt and maintain your code if your company goes bankrupt or if your company stops supporting the product they purchased.

It's really an insurance policy and it's usually required by large companies when dealing with smaller companies. With smaller companies the chance of the company going out of business is much greater, hence the insurance policy.

When negotiating the terms of the software escrow, you're going to be at the mercy of your large customer. They will typically insist on using their escrow agreements and they'll try to push terms that are favorable to them. Make sure you read the terms carefully and you need to pay special attention to the source code release conditions.

You also need to pay careful attention to any requirements around the need to refresh the source code stored in escrow when you produce new releases. If the requirements are onerous (eg. every dot release, bug patches, multiple code branches, etc.), it will be a lot of work on your end to keep the software escrow current.

When it comes to picking a service provider, you're better off going with the service provider recommended by your customer. They will have more experience in working with the escrow service provider and they will be able to negotiate better rates.

One of the largest and more stable companies in the software escrow space is Iron Mountain. I've used them in the past and most companies will trust them over some of the other smaller companies.

http://www.escrowassociates.co...
This is a safe site.

http://www.escrowtech.com
Also safe. This can get complicated to protect your rights. There are so m...

http://www.escrowassociates.co...
This is a safe site.

http://www.escrowtech.com
Also safe. This can get complicated to protect your rights. There are so many gotchas that you must have your specialist attorney write the terms and the agent (escrow) to be used.
In the situation you described, it is customary to charge a higher price for the software.