Guard-IT Software Escrow Services: News & Press Releases

"Liaison Technology Software Firm Shuts Down"

From the Austin Business Journal, April 12, 2002
By Stacey Higginbotham, Austin Business Journal Staff

Austin's Liaison Technology Inc. has told customers it has gone out of business, and its Web site no longer can be accessed.

Company executives couldn't be reached for comment. The company, founded in 1999, developed content management software for e-commerce Web sites. Its offices are at 11044 Research Blvd. in Northwest Austin.

Jack Allewaert, CEO of Long Beach, Calif.-based AcquireX, a procurement network for education products, still plans to use Liaison's software to manage the 500,000 products it sells over the Internet.

That's because an escrow service stored Liaison's source code. Now, AcquireX can generate its own adaptations for the software if needed and handle customer support.

"The losses of customer support was a risk we identified in the purchase, so contractually we arranged to protect ourselves," Allewaert says. "They have a great product that we wanted despite the fact that they could not get financing."

According to MoneyTree surveys, Liaison received a total of $22 million in venture capital from investors such as Dell Ventures, Austin Ventures and Techxas Venture Partners.

AcquireX is able to keep using the software by arranging for extra training of some AcquireX employees and by gaining access to the escrowed source code -- akin to the recipe for the software.

Allewaert's protection of his investment in Liaison software is becoming more common as software companies collapse after failing to receive enough venture capital.

"With the [information technology] industry in flux, you don't have to look too far for examples of people putting source code in escrow," says Jim Ford, CEO of Austin-based Guard-IT Corp., which stores source code in escrow.

Ford says he releases software held in escrow fewer than 10 times a year. AcquireX and Liaison aren't Guard-IT clients.

"I thought we would have seen more last year, given the state of the economy, and we could still see more this year. But it's not in the same league as bankruptcies," Ford says.

Ford says the Sept. 11 attacks brought awareness of various business risks to the forefront, so escrow activity is increasing. Guard-IT has been in business since 1999 but has seen a 30 percent jump in business leads through the end of 2001.

One of the companies propelling Ford's business is Austin-based QuickArrow Inc., which escrows its software as a customer service. QuickArrow develops software that provides online sales, support and business management.

Ron Jennings, chief financial officer of QuickArrow, says his company was responding to a customer's request when it set up its first escrow account. But now, after so many customers have coped with shut-down software firms, he uses his company's willingness to place its software in escrow as a bargaining tool.

Jennings estimates it costs about $200 per customer to set up an escrow account. QuickArrow's software sells for about $85 to $135 per user.

Michael Davis, a partner with the Austin office of the Haynes and Boone LLP law firm, says that when dealing with escrow services, it's important to ensure the source code and other information placed in the account are sufficient to replicate the software. In addition to setting up the account, he recommends concerned companies test the source code to make sure programmers can work with it.

Article text copyright 2002, American City Business Journals Inc.

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