The world is a global village. This phrase has achieved its literal meaning in the past couple of years with increased communication, collaborative development, and integrated growth. The software development industry, undoubtedly, enjoys its fruits in the best way possible. 

In recent years of software development, we have seen drastic shifts in software development, manufacturing, and distribution. One new concept is “software development outsourcing.” It comes to realization when a software company hires an external vendor to create some or all parts of the required software. It benefits the software company with the following:

• Reduced costs
• Decreased complexity
• Quick work
• Enhanced efficiency, etc.

But, there are issues and risks that we need to mitigate before outsourcing software development.  These risks can not only cause monetary losses to the company but can also cost its reputation and work. Here, we provide a software development agreement checklist before outsourcing software development to third parties.

Software Development Agreement Checklist – Software Outsourcing

1. Projects Requirements
2. Acceptance Testing
3. Cancellation Periods
4. Monetary Rules
5. Intellectual Property Protection
6. Data Privacy Laws
7. Non-infringement Section
8. Legal Administration
9. Closure Clause

1. Project Requirements

First, specify the requirements of the projects in detail. What are under development? What are the key milestones? Which features are the most crucial? What is the project scope? How to estimate a project? The contract should answer all these questions before moving further a single step in the process.

2. Acceptance Testing

Acceptance testing is the last phase of software deployment where a customer accepts or rejects the product. The vendor should plan it with the client company. Answer the questions: Who will check the software? What are your critical parameters for test conduction? What if the client company doesn’t like the final product?

3. Cancellation Periods

Working with diverse teams comes with the risk of one party canceling the contract. You should state the cancellation period. How long is the development since both parties can retract the contract? Up to which stage of development is cancellation permitted? 

4. Monetary Rules

Decide the payment methods wisely and collaboratively. Choose the currency of payment, the mode of payment, the hourly or monthly rate, payment deadlines, and taxes details.

5. Intellectual Property Protection

Intellectual Property Rights are the most crucial yet overlooked part of software distribution and licensing.  Sign a contract stating that both parties will protect the unused information, designs, critical information, or private documentation. This part of the contract guards the vendor’s ideas and layouts. 

6. Data Privacy Laws

It is one other type of data protection that defends the client company’s information. It states that the third party cannot distribute or publicize sensitive information about the client company or the project.

7. Non-infringement Section

The contract should state that the vendor will not try to impetrate the end user. Also, the third party will not attempt to hunt the client company’s employees for any purpose.

8. Legal Administration

If both companies are in different parts of the world, identify and decide which country or region’s laws you abide by. Who will regulate the contract in case of any issues?

9. Closure Clause

There should be a clause to prevent either company from canceling the contract and the measures if any party does so.

NOTE: Before starting any project, please mark and read the contracts to avoid confusion or losses.