I work for a start-up company who has a client requesting that we place the source code for our SaaS (software-as-a-service) application in escrow. They're concerned that, as a start-up, the company may fold which will leave them in a position to scramble to replace the feature set that our software provides. As it is a niche application they feel they will be unlikely to find a suitable replacement.
This is one of our largest clients so we're eager to maintain a good relationship. The client has not invested in the company outside of its relationship to us as a customer. They do not own any shares in our company.
I'm personally tempted to take the position that this risk is inherent in doing business with any software company - and more so with SaaS providers. Of course, such a terse reply isn't likely to earn any points.
Has anyone ever run into something similar? What are some common routes to follow which may satisfy our client? I have, of course, recommended that our CEO and COO seek legal counsel on the matter before drafting any contracts which might result in the company's loss of IP.
Also please note that for the sake of this discussion we can ignore the obvious logistical issue of keeping source code up-to-date with an escrow provider.