People are familiar with hardware and software. Now get used to orphanware.

‘Orphanware’ is what IT industry analysts call a software product in which a company has made a significant investment but whose owner has abandoned it due to insolvency, sale of the company or any other reason that leaves the business with an unsupported product that it cannot maintain.

In today’s risk averse and corporate governance-driven business environment, orphanware is the latest buzzword.

Perhaps the concept of ‘orphanware’ is easier to spot by way of example. Say you are the IT director of an insurance brokerage firm and you’ve been tasked with finding and implementing a specialised policy and claims management platform. There are established players offering solutions, but they come at a high price.

There is also a neat product being offered at a price well below those systems from a smaller local supplier that seems to offer both an excellent fit as well as a real value-for-money software licensing model.

You go the low-cost route and invest heavily in, not so much in licence fees, but in the implementation project, database conversion, perhaps even going as far as creating a specialised database, new hardware platforms and, of course, people training. Next, the vendor runs into financial difficulty and is acquired by one of the established solutions vendors that promptly pulls the plug on the software product that has now become mission critical to your business processes and functions.

Just like that, you’ve become the proud owner of orphanware.

Fortunately, cost effective active escrow arrangements could have prevented this.

Neither D&O insurance nor Multimark commercial insurance policies provide you with cover for this kind of business disaster.

So, given the very real incidence of orphanware out there, how do you protect your company against being left holding the baby?

Active software escrow is an obligation on the part of the supplier of the software your company uses to deposit the source code for this software with a neutral and independent trusted third party, the escrow agent. The third party is authorised to release the source code to you under conditions agreed upon by the supplier and your company.

‘Source code’ is vital: when a company licenses software, it usually gets a licence to use the machine-readable ‘object code’ but specifically not access to the ‘source code’, the ‘secret recipe’ for the software product.

If the software supplier cannot support your software, the only way you can fix any problems is by accessing the source code.

Businesses are often entirely dependent on software over which they have limited or no control.

The key question: "What are our annual revenues that are dependent on technology platforms that we do not own?" The imperative: active source code escrow in underwriting this risk.

An active escrow arrangement is typically the only way whereby access to maintainable information systems, by the software end-user, can be guaranteed irrespective of the stability or commercial status of the software supplier and if certain predefined commitments such as warranty, support and maintenance are not honoured.

"It is an insurance policy to make sure you have access to that source code should that vendor no longer maintain that software for your organization, so this gives you an alternative," notes Jane Disbrow (Research Director, Gartner IT Asset Management and Applied Research Group).

Disbrow advises: "It is very important when setting up an escrow agreement to make sure the contract actually gives the customer the rights it needs in order to maintain that source code."

According to Stellenbosch-based Genasys Technologies managing director Steve Symes, "South Africa – with its international business community, familiarity with US, UK and European business practices, and its national software industry – is starting to demand the kind of custodianship escrow has to offer. By entering into an agreement with Escrow Europe, Genasys is also demonstrating its commitment to assisting both existing and potential customers meet their corporate governance requirements as well as streamlining the process for them."

Writing for MCP Magazine, Lafe Low said: "The rewards of dealing with smaller, intensely specialised vendors or start-up software companies can outweigh the risks, but you have to go in with eyes wide open and a ready backup plan. You can stick with the big dogs, or you can isolate products you buy from potentially questionable vendors, but you had better be ready for anything. Companies will come and go, and you don’t want to get caught in the vacuum they leave behind."

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