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I have a large client whose customer has raised the issue of placing my company's software in escrow. I'm going to incur expenses upfront in making the software buildable outside of my environment, as well as additional expenses over the life of the escrow agreement, in order to meet what I expect the terms to be.

My assumption is that it is "reasonable and customary" to expect to be compensated for these expenses upfront since the escrow agreement is a contract to do those things over a period of time. What other factors come into play when deciding what to charge to agree to software escrow?

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We have been in the software escrow business (Software Escrow Guardians) for over twenty years and have clients who pay for services in all combinations: 100% by the supplier, 100% by the user and combinations in between.

Obviously from a users perspective their strongest negotiating position is before the ink is on the paper. From a suppliers perspective their position is strongest is after the ink is on the paper because escrow is then an extra.

Escrow is not onerous if the supplier has the processes in place to meet the requirements. The most important aspect is to ensure you have a software escrow provider, both of you are comfortable with.

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Thanks -- my development process wasn't geared towards building the software out of house, but a few extra scripts should solve that problem. – Julie in Austin Sep 23 '12 at 11:40
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If this is a customer request and outside of your usual method of doing business, it's not unreasonable to expect the client to pay.

I would suggest charging tariff rate for preparing for escrow, and then the costs of the escrow plus administration time.

An estimate up front should be sufficient to have the customer agree, or change their mind.

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I would do time and materials at an agreed rate. Basically you shouldn't be out of pocket for this, but you also don't know what is involved.

Makes sure they pay the actual escrow agent, and also allow for you to bill them an hourly rate for any effort required to facilitate this.

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