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Plane grounding points up value of escrow

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The nearly hour-long grounding of 150 United Airlines planes earlier this year – which resulted in an estimated loss of $3 555 000 (R35,55-million), a share price fall of nearly 4% and other business impacts to scheduling, ecosystem delays and brand impact – highlights the power of software escrow.

That’s according to Escrow Europe MD Andrew Stekhoven, who says that various newspaper articles in the US had attributed the grounding to unspecified automation issues as well as “occasional computer faults arising since the 2010 merger between former parent UAL and Continental Airlines created the current United Continental Holdings”.

He also referrs to an article in an ongoing series of performance retrospectives on techbeacon.com in which technology author Todd DeCapua suggested that the root cause of the airline’s computer issues appears to be software providing incorrect information to the dispatching system, along with associated integration and/or cross dependent systems.

“DeCapua also wrote that the volume of acquisitions and mergers being observing across several industries and countries today could be wreaking havoc on business computing systems and causing potentially catastrophic failures that impact the end users,” says Stekhoven.

“Importantly, DeCapua said that the goal of any business must be to mitigate potential risks.

“I couldn’t agree more: the fact that a company’s core, mission critical systems are dependent on licensed software implies great operational risk, and the business continuity considerations associated with this risk should be a major concern for not just the CIO but all company directors and officers.”

According to Gartner, active software escrow as the most elegant solution for managing this risk because, under specific conditions agreed in advance – such as bankruptcy of the supplier, mergers or acquisition and the possibility that a vendor does not honour their maintenance and support obligations – the software escrow agent is authorised to release the material on deposit to the beneficiaries.

“Escrow means ‘security in the hands of a trusted third party’. As an independent and neutral third party, the escrow agent guards the business-critical assets of its client, including source code of software, important databases and/or industrial designs,” says Stekhoven.

“Passive escrow simply sees the escrow agent confirming that the material has been deposited. By contrast, active escrow ensures that all of the necessary components are included in the deposit, and are in working order. In line with international accepted practice, active escrow meets industry best practice standards and is compliant with SAS 70 and type II audited, HIPAA and PCI DSS.”

One of South Africa’s longest-established software escrow service providers, having opened its doors in 2004, Escrow Europe stands apart from other escrow agents because it concentrates entirely on active escrow.

It provides a broad range of escrow services including software escrow, SaaS escrow, data escrow and technology escrow, for the benefit of users, suppliers and advisors.

For technology users who trust their suppliers to provide support and maintenance for their applications, active escrow helps eliminate the risk associated with the dependence the supplier-user relationship implies, particularly where business-critical applications are concerned. For suppliers, it can be of great comfort to their clients to know that they have taken extensive measures to safeguard their interests in terms of security and continuity. As an auditor, lawyer, risk practitioner or procurement specialist, advisors protect the legal and/or economic interests of their clients. Combining legal know-how with technical expertise, Escrow Europe can help advisors build reputable businesses in this field.

The company is truly independent with no ties or relationships to hardware or software companies. Its team consists of lawyers, consultants and ICT specialists. The combination of corporate legal expertise with technical know-how gives Escrow Europe a unique position in the market. Whereas most escrow agents are either legal or technical specialists, it is able to offer both types of expertise for the benefit of its clients.

Escrow Europe has achieved the ISO 9001:2008 quality certification standard against which professional escrow service providers – local and international – are measured. The motivation for this is that Escrow Europe wanted to confirm the company’s commitment to the highest quality escrow service delivery on a world-class basis in a manner that would:

  • Affirm for its clients that they have selected to partner with a best-of-breed escrow service provider.
  • Provide additional assurance that clients’ investment in business-critical intellectual property and technology is protected in a manner that provides proper re-assurance that they will be able to continue functioning should their suppliers no longer able to support the technology.
  • Confirm that deposits – the ‘crown jewels’ for many technology businesses’ – are being subject to the highest quality safekeeping standards, on a measurably consistent basis.
  • Send a very powerful message to an international audience about its commitment to good corporate governance and operational risk management.

It is the only escrow company on the African continent selected by Microsoft as one of the featured software escrow companies for the Certified for Microsoft Dynamics (CfMD) programme.