What Should You Do When Your Software Vendor Goes Out of Business?

The world has been slowly moving from offline storage and in-house servers to online and ever-present cloud platforms. When you look at this In terms of storage, maintenance, security, and running costs, this is a good deal for a majority of the businesses. However, with the cloud, businesses will have to adapt to a whole new set of issues and best practices to stay safe.

What Should You Do When Your Software Vendor Goes Out of Business

With the proliferation of cloud, there are so many companies that offer services in SaaS model. It is very difficult when your business operations depend a lot on one particular software and it goes bankrupt.

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How it all Starts?

Though many consider cloud companies and services to be one of the fastest growing sectors in IT and related services, many overlook the fact that over 25% of new businesses go bankrupt within the first couple of years. Though some of them may appear to be financially and technically stable from the outset, parameters change on such a rapid pace in this fast-paced industry that nothing guarantees their stability in the long run.

Traditionally when businesses are not sure about a company, they would vet it by taking a keener look at their financials and past dealings. Long term stable financial statements, sustained business growth, and a growing list of customers are good indicators of the reliability of the vendor. The same cannot be said when it comes to SaaS companies. The rate at which the industry is growing makes it too difficult to predict the outcomes.

Damage Control

When a SaaS business goes bankrupt and announces closure, it would take a lot of time to grab all of the required data and systems from the SaaS platform, and then transfer the data to a new working environment. The whole process can last a few weeks and sometimes even months. To keep your business afloat in this period of transition is another herculean task.

So, how can you save yourself under such circumstances? For one, you can build everything in-house, which would require you to have a fully functional IT department that is capable of handling it. This is not possible for small and medium sized businesses. Developing and maintaining such a thing is a major undertaking, even for large companies.

The next option is a software escrow. It is a service that stores the software data, source code, and other related documentation that is necessary for the functioning of software without any interruption. To put it simply, a software escrow is a specialized third party agent who ensures that both the licensee and the software vendor are protected in a transaction and that the purchased software does what it’s supposed to do during the entire duration of the contract. If the vendor goes bankrupt during the contract period, you will be able to access the source code and other related documents to make sure that the platform stays online as you figure out the next plan of action.


I hope this article was useful for you to learn more about the new set of difficulties that have cropped up with the rise of SaaS businesses. We also discussed ways in which you can make sure that your company is not affected when a vendor goes bankrupt. If you have any doubts with regards to this, let us know through the comments and we will be glad to help you out. If you have any suggestions regarding how we can improve the article, let us know them through the comments as well for us to improve.

Do you have any other reservations against using a software escrow? Have you tried any other strategies and tools to make sure that a critical software for operation is not affected at any cost? What is your opinion on the state of the industry when it comes to SaaS businesses? Do you think its stable enough for small companies to flourish? Let us know through the comments.

What Should You Do When Your Software Vendor Goes Out of Business?
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