escrow presentation

Escrow SolutionsEscrow Solutions

NCC Group PlcManchester Technology Centre Oxford RoadManchesterM1 7EFwww.nccgroup.comwww.nccgroup.com

Lucy Davidson Lucy Davidson

Key Account ManagerTel: +44 (0) 161 209 5256Mobile: 07807066642e-mail: [email protected]

2Commercial in Confidence - © Copyright 2009 NCC Group Plc - all rights reserved

Agenda

About NCC Group

The need for software escrow

What is software escrow?

Benefits

NCC Group Escrow Solutions

Primary Components Of Escrow Agreement

What Can You Do if a release event is triggered

Why is testing important?

NCC Group Verification Services

Effect Of Current Economic Climate

Risk assessment / escrow policy

Current Agreements


About NCC Group

What we do: independent IT assurance, security and consultancy services - over 15,000 clients worldwide including 94 of the FTSE 100

USP: no ties or relationships to hardware or software suppliers - focus on developing intelligent solutions & building lasting partnerships with clients

Size: based in Manchester with offices throughout the UK, Europe & California, currently employ 350 + staff worldwide

History: formed in 1999, listed on London Stock Exchange since July 2004, consistent track record of solid growth. July 2007 full listing

Our business: three complementary divisions: Escrow Solutions, Assurance Testing and Consultancy NCC Group is the world’s largest Software escrow

provider


Our services

Escrow SolutionsEnsure business-critical material or source code is protected and

accessible should a key supplier failConfirms material held is properly protected - verify it can be

rebuilt from components

Assurance TestingTest & monitor system, network & web site performance to ensure

effective, robust and delivering optimum performanceEthical security testing of networks and applications and security

policies in practice to ensure organisations safe from threat of unauthorised access

ConsultancyProvide advice at all levels to help organisations improve

performance through effective use of IT & business processesProtect organisations against a variety of risks through

development & implementation of effective plans and compliance with relevant standards


The need for software escrow

The failure of any these applications would result in financial or operational loss

Therefore organisations are reliant on the owner / supplier to provide support and maintenance

BUT they will only supply the ‘object code’ - the ‘source code’ is required to support and maintain

However if the owner is no longer willing / able to provide support in the event of failure…..

And there is increasing scrutiny on corporate governance and risk management – Sarbanes Oxley, Basel II, FSA Rules and Regulations

Source: Vision One Research 2007


What is software escrow?

Legal agreement between supplier, licensee & escrow provider (distributor if applicable)

Supplier obligated to deposit source code in escrow and to keep updated

‘Trigger Events’ defined in the agreement where source code released to licensee such as: Liquidation Ceasing to tradeFailure to meet maintenance obligations IPR assignment (if new owner provides

no escrow protection)


Benefits for the licensee

‘Insurance policy’ against the unpredictable IT market

Allows continuing maintenance of critical applications in event of release of code

Provides protection during investment in IT development

Essential part of business continuity and disaster recovery planning

Provides leverage against supplier who defaults on contractual obligations / IPR’s assigned to a new supplier


NCC Group Escrow Solutions

Software EscrowSingle and multi licensee agreementsHolding AgreementsDevelopment agreementsSpecialised outsourcer and distributor agreementsStaggered release agreements to protect distributors and end-usersWeb sites and web applications covered

Information EscrowProduct designsManufacturing processesMarketing information

Copyright Protection Agreement

NCC Group Escrow Solutions are flexible and can cover all situations


Primary Components of Escrow Agreement

Owners Duties and Warranties Initial deposit within 30 daysFrequency of future deposits (yearly / quarterly)Scope of material to be depositedWarranty of IPR ownership in the material

Licensee ResponsibilityNotify NCC Group if deposit update requiredConfidentiality undertaking in event of release

Release Events

Release Process Independent expert determination in the event of disputeTime bound process

10

Commercial in Confidence - © Copyright 2009 NCC Group Plc - all rights reserved

Primary Components of Escrow Agreement

Integrity Testing and Full Verification

NCC Group Liability / Indemnity

TerminationOwner cannot terminate without licensee consent

SchedulesPackage NameNCC Escrow Fees

• The proportion of fees paid by each party

11


What can YOU do if a release is triggered?

Get a release of the source code deposit:Appoint another software supplier to take over maintenance ORTake over support and maintenance in-house i.e. be prepared in the case that the application subsequently fails or

needs maintenance

Use the potential option of release to negotiate a good deal with the new Owner of the IPR, introduced through NCC Group

Remember that Escrow is a leverage tool in cases of: Issues with support and maintenanceChange of IPR ownership, negotiate good terms with new supplierSoftware Owner liquidation – leading to change of IPR Ownership

12


Why is testing important?

Only the depositor knows what’s stored on the deposited media

Mistakes are often made when preparing the deposit

Vital information such as build scripts can be left out

The scope of the material to be deposited can be misunderstood

It’s too late to ask questions if the supplier has gone out of business…

13


NCC Group Verification Services

Full Verification: We observe complete build of application at supplier's site Every detail of environment & build process detailed in a comprehensive report,

describing every step involved in building the source code into the working application

Escrow Now: Recommended where source code maintenance would be undertaken by a third party Full Verification with additional assurance of build in independent secure location - our

secure test laboratory Report also provides information on timescales, technical skills & costs of rebuild to assist

with selection of suitable third party

Escrow Complete: Recommended where source code maintenance would be undertaken by the licensee Full Verification with additional assurance of build repeated in licensee's environment Source code collected & built at supplier's site and then built & installed at user's site

Integrity Plus: Recommended for other material which cannot be checked through build process / during

software development Intelligent collection & audit of material at supplier’s site

All escrow deposits are integrity tested as standard to ensure accessible and virus free

14


Effect Of Current Economic Climate

Software companies need cash to develop new applications to survive

Access to credit is the lowest it’s ever been

Small and mid size companies are under real threat of closure due to falling profits and not being able to finance debt

Your company is reliant on those software owners

If your supplier fails the effect on your business could be catastrophic... e.g. Zavvi uses EUK (Woolworths) EUK stops supplying Zavvi has to close online sales as they have no stock and are now being run by

administrators with 22 stores already closed

200% increase in release events in last ¼ of 2008

15


Act on Escrow NOW

Nortel has gone into Chapter 11:

Nortel is the first major vendor in the ICT industry to have gone into administration as a direct result of the credit crunch.

http://www.electronicsweekly.com/Articles/2009/01/14/45269/nortel-goes-into-administration.htm

1 in 5 software companies could go out of business according to a recent survey by Plimsoll

http://www.computerweekly.com/Articles/2008/04/24/230427/recession-could-force-uk-software-firms-out-of-business.htm

Autodesk has joined the growing number of technology companies to cut staff, announcing today that it will reduce its workforce by 750

http://www.vnunet.com/vnunet/news/2234114/autodesk-cuts-750-jobs

16


Risk assessment & escrow policy

Assess business criticality of application (guidance sheet provided):Initial procurementMajor upgradeEvery 12 months

Educate and involve business users in evaluating need for escrow & managing protection once in place

Educate and involve sales staff in evaluating need for escrow protection to assist sales and protect distributor arrangements

Check required protection is in place through regular risk management and business continuity audits

17


Escrow Clause

The [owner] shall lodge the source code (documents, materials and any other relevant information) of the [software package as defined within the software contract] with NCC Escrow International Limited upon the attached terms and conditions. The escrow agreement shall be completed as soon as practicable and in any event within [30 days] from the date of this agreement. In addition, should the [licensee] require it, the [owner] hereby agrees to cooperate in carrying out full verification testing as defined in and in accordance with the terms of the escrow agreement.

18


Questions & AnswersQuestions & Answers

www.nccgroup.comwww.nccgroup.com

19


20


21


Your Account Manager

Lucy Davidson

NCC Group plc

Manchester Technology Centre, Oxford Road,

Manchester M1 7EF

UK

+44 161 209 5256

[email protected]

www.nccgroup.com

escrow presentation

Documents

escrow protection

ncc escrow fees

services escrow solutions

software escrow thefailureof

consultancy ncc group

new supplier software

owner supplier

source code deposit