Do you own a SaaS startup? if so, you know that business is booming for software-as-a-service (SaaS) providers. Along with sales to consumers and small businesses, enterprise organizations are investing heavily in off-site software, and Gartner Research forecasts that almost 50 percent of enterprises will use cloud-based services by the end of 2017.
And as investment in SaaS increases, businesses are realizing the importance of protecting their investment in these services, particularly for mission-critical programs. If the service provider cannot fulfill its obligations for some reason, such as a natural disaster, bankruptcy or acquisition by another company, the customer may be out of luck unless they complete a deposit retrieval from their tech escrow agent. Offering a deposit retrieval option is a great value added feature to help SaaS startups market themselves as different from their competitors.
Takes Three to Escrow
Depositing material held in escrow can save time, money and headaches down the road. A backup plan in the form of a tech escrow agreement requires three parties: the software provider, the client (or clients) and the tech escrow agent. The agreement essentially sets out the terms to give the client (also known as the licensee) access to source code and materials deposited by the software provider and held in the custody of the agent.
This allows the client to create object code and support the service in the event that a specific release event occurs. If such an event does take place, however, the licensee may use the material held in escrow only to support the licensed software service that they had already purchased. Deposit retrieval is similar to visiting a bank to withdraw money that your grandmother deposited. It can be used only for grandmother-approved purchases, such as paying for college or buying a home.
Tip: if you don’t know of a tech escrow agent, ask your corporate lawyer – they should be able to put you in touch with the right people.
An Incomplete Deposit Equals a Worthless Deposit Retrieval
if you’re going to offer a deposit retrieval option via a tech escrow agreement, take the time to help your clients realize the importance of a good deposit.
An escrow agreement is only as good as the material on deposit. Licensees (aka your clients) may get a rude awakening when they realize that decoding, compiling and transforming source code into executable object code is not for the fainthearted. Even knowledgeable technical people with extensive programming skills run into trouble. This happens if the deposited material is missing critical information. If a deposit for tech escrow verification evaluation is incomplete, it can’t compile until the developer provides more information. This makes deposit retrieval of the delivered material useless. This also illustrates why simply signing up for tech escrow services is not enough. A business has not protected its cloud-based software license investment until it has verified the materials.
As a SaaS provider, you can gain critical credit with your clients by introducing them to a tech escrow service.
Five Steps to Ensuring the Goods are Good
If you’ve just launched your SaaS startup business, chances are you’ve had some practice with testing – including testing new business ideas. Guess what? Deposit retrieval testing is the key to tech escrow verification. A comprehensive verification of the materials provides peace of mind to your client through the knowledge that, in the event of a deposit release, they’ll be able to quickly and effectively retrieve the material to re-create the service needed and to maintain your software on their own.
Verification testing is a multi-step process. Tech escrow agents usually test deposit retrieval immediately after the contract signing, and periodically afterwards to address software updates while the agreement is in effect.
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Step 1: Quality Testing
There is no point to withdrawing junk files, so one of the first things to test is the health of the material on deposit. Are the files readable? Are they free from viruses that could corrupt other parts of the IT infrastructure? Is the material encrypted? If so, does the escrow agent have the decryption key?
Step 2: Environment Reconstruction Directions and Parts List
Before deposit retrieval, it is important that your client know exactly what is on deposit. An itemized inventory should include how-to instructions for re-creating the environment in which the software was first developed, as well as a parts list describing the required components.
Step 3: A Test Run via Compile Testing
To verify that the materials held in escrow will compile, extensive and repeated testing should be conducted. Using only the escrow deposit material provided in Step 2, compile testing verifies whether the software can actually be re-created and run on the client’s hardware.
Step 4: Functionality Testing aka as “But Does it Run Properly?”
Once it’s confirmed that the deposit materials run, it is time to see whether it runs properly. Functionality testing occurs by evaluating the performance of the compiled deposit retrieval software against your SaaS-provided licensed software being used. Performance should match every time.
Step 5: The Final Exam… or… Exams
The last step of testing is actually a series of tests to evaluate the robustness of the deposit material when used to perform all the required services. Successfully passing these tests lets your SaaS client know that the material on deposit will work should it need to be released.
The Never-ending Tech Escrow Verification Story
Although these five steps encompass the entire verification testing process, tech escrow verification is never really concluded. A tech escrow agreement usually requires the software provider (reminder – that’s you) to deposit updated source code and materials with the escrow agent regularly. The customer is then responsible for verifying subsequent deposits and their quality.
Verification testing and deposit retrieval isn’t just about challenging you and your software. It also tests your client’s ability to maintain the software using the original source code and supporting materials. And verifying SaaS goes beyond testing the technology; it simply makes good business sense both for your clients who use your mission-critical Saas, and for you as a growing SaaS startup.
After all, if an organization is willing to invest the time and ongoing cost of implementing a new SaaS program through the training of staff and the migration of previous work onto the new platform, it makes good business sense to protect that investment. And in today’s increasingly crowded SaaS marketplace, going above and beyond to offer outstanding customer service should include tech escrow arrangements and well-tested deposit retrieval procedures.
What do you think? Is tech escrow and deposit retrieval really a good sales tool for SaaS startups? Let us know in the comments!