Software Development Contract – All You Need To Know to Work on Crystal Clear Terms

Contracts. Though all the back-and-forth during the signing process might be tedious, we all agree we need them. But creating a software development agreement that honours mutual interests and makes things super clear instead of hiding them behind legalese and fine print is still not as widespread as we’d like to think. So let’s look at what should be stated clearly in your software development contract, based on our experience at DeSmart. 

What is a software development contract?

Software development agreement and service contracts are contracts for the use of software developed by your software house, establishing the mutual expectation of your software development company. Dealing knowingly and unrecognised can put your company in the red. Tell me the reason. In the long run, the risk of destroying your intellectual property can be a significant threat to your company’s success. A software development contract defines the scope and cost of projects, intellectual property rights, privacy success metrics, timeframes, and warranties. Although these software development contracts have the same features as other services agreements, they’re typically more flexible.

When it comes to contracts, transparency should be non-negotiable

When you’re working with a software development company, but, any contractor, stating the terms upfront clearly is super important for both sides. Especially when we’re working on custom projects with tons of specific requirements and factors we need to include to ensure we get the desired result. 

From copyright to risk management or agility and openness to changes, the contract should be our point of reference. Whenever we have doubts, or encounter unexpected problems (and many software projects will include them, let’s be honest), the contract should state the course of action. And it should do it in the most transparent way possible, which is the whole point of having a contract agreement, by the way. (How are we supposed to agree on something we don’t understand?)

Let’s take a look at some elements we at DeSmart think are essential for a software development contract agreement – and what we include in our client agreements to make sure the terms are super clear and we have guidance throughout the project.

What should go into a software development contract agreement

Securing a specified team capacity for the duration of the project

You should be confident that the software development company you’re working with actually has the resources to complete the project in a specified timeframe (need we mention you should specify that timeframe in your contract?) And that includes replacements and backups in case anything changes.

This helps both sides of the agreement. You won’t compete with other client projects if the outsourcing company gets overbooked or other projects drag on, consuming the time they were supposed to spend on your project. And it makes things much more organised for the software development company, knowing exactly who’s booked for how long. Win-win.

Services description and project scope

A software development agreement must define precisely what the client expects from the software house. The creation and availability of certain features, and the number of permitted revisions, are examples. You must submit detailed plans and include these in the contract. Identify tools and processes, such as source code repository software and project management styles. Make sure these sections list possible modifications to the scope and procedures to achieve them if necessary.

Privacy and confidentiality

Your software house must keep confidentiality. The agreement must specify which information can be confidentially treated and determine the developer’s responsibility in releasing the disclosures to the public. A few projects might require a developer to destroy all project material they had written, which includes specifications, roadmap technologies, designs or mockup plans. In addition, it’s necessary to ensure the software developer meets the requirements of your privacy policy, particularly in cases involving proprietary or trade secret information or personal customer information.

Ensuring a backup is created for the project

This one’s pretty straightforward – that’s why it’s easy to overlook. So include creating ongoing backups as part of the contract to avoid unpleasant surprises during the project.

Defining roles and responsibilities

Make it clear who the product owner, the scrum master, the project manager, etc. And, even more importantly, what their exact responsibilities in the project are. The more specific you are at this stage, the better. 

The term of the agreement and what happens next

This is where the entire service level agreement comes in, plus the warranty and any post-handover.

This will usually include services like hosting, maintenance, etc. Anything that clearly states how the software development company will support you while your software is in the market.

Another seeming no-brainer is that you shouldn’t skip any contracted services, including software.

First, you’re getting a clear statement of the license and conditions under which you can use or alter the software. And second, you should include statements preventing the software house from reselling the idea or code to other businesses.

Coding standards

Again, as with anything you’re outsourcing, specify the standards of the service you’re expecting to get. Don’t forget a clear statement referring to what happens in case of detected bugs and imperfections (and what they are in the case of your software). 

This is a common ground for misunderstanding – so make sure all the iterations and bug fixing procedures are clearly described and leave no room for doubt about what goes under the agreement and what’s extra work on the part of the software house.

Quality assurance (Q & A)

Regarding bug fixes and standards, ensure the contract clearly states the inclusion of software quality assurance experts and testing procedures. 

This is also where DevOps should come in – ensure the contract includes a DevOps engineer (our agreements do.)

Making room for changes

This is maybe the trickiest part but inherent in agile software development. By its very nature, agile software development will mean things will change in the course of a project. And the agreement needs to define the space for changes – but also how you’re going to adapt to them. It’s best not to leave it “for later” – because the “later” might surprise you.

Of course, an experienced team will know what to provide for in the case of your specific project (that’s what we’re doing in our contracts.)

Pricing and billing

This section may be helpful to you when it comes to preventing surprise fees. For developer rates, a price range will be requested in cases where a specific price is offered. Clearly define what happens in billing to estimate the cost of the software.

And remember what we already said – the more you know about the project, to begin with, the less the changes will mess up with your deadlines and budgets.

Warranties and liabilities

Depending upon your company policies and conditions, the vendor may also need documentation or a list of third-party codes and security policies to protect against backdoor access. Considering that development providers cannot exclude liability or restrict them depending upon the type and method you’ll utilise the software. In addition, the vendors will probably decline liability for the damage and costs that could arise if the software is used in any form or sold.

Success metrics

In contrast to more agile software development contracts, success metrics are best avoided in general terms and vague language. Set precise metrics for your project success to minimise any confusion; it’s a must. Having the best information about the metrics you can use is essential. The slightest delay you can anticipate in a development project, the more arguments you can have.

Transfer of intellectual property

Intellectual assets are essential to software development programs. The following paragraphs should describe all the legal ownership of the source code design, patent rights, copyrights, and trade secrets. If a contract was terminated, you could become the owner of what was completed.

Critical points of a standard software development contract

Once you have identified the possible contract type and its strengths and weaknesses, you’ll have a clear idea of which is suitable for both you and the vendor. We can proceed with this contract and check out the specific aspects of software development.

Services to be provided

It is recommended that you specify the development services your client will need. In most cases, these sections refer to a specified specification incorporated into the contract. The specifications have to define clearly what projects are being completed. Try to provide a complete specification for your partner so that they can prevent misunderstanding. Service sections will also describe the procedure for changing scope. All proposals by either party must be written. We suggest you list all changes requested in this document with the following information.

Project time and cost

This section sets your agreement on the time or price to complete the project. This document describes your selected contracts. Indicate hours, rates, milestones, development phases and time frames. It gives you an estimated cost of software development. You must also be the responsible for delays from each side. If you agreed to pay as a result of actions progress partially, add this aspect. An annexe can include payment plans, schedules, and development planning. Please check the signature of both parties for each document.

Acceptance tests

Indicate how the acceptance tests are performed by yourself or by your vendor. Generally, acceptance testing is performed after every development step; hence, the section may include detailed plans for completion of the work.

Don’t leave your software project up to fate 

Instead, get a software development team who knows what they need to know (but also what they don’t know) for the project to succeed according to the timeline, budget, and your expectations. 

You’re about to get a professional and free cost estimation in DeSmart.

We’ll be happy to talk about all of these.

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