Software Development Agreement: Checklist


Published: 27 Jul 2022

Software development agreement

software development agreement checklist

Every software development venture requires a well-rounded contract to maintain an effective partnership between a stakeholder(s) and a provider of external teams. 

If you work with a provider like nCube, creating and reviewing a software development agreement checklist is essential before you approve a team of developers and they officially join your company. At this stage, we encourage our clients to consult with their legal departments to draw a solid custom software development contract that covers all the aspects they deem vital. 

In this post, we will go over a standard software development agreement checklist for building offshore/nearshore teams we use in our practice. 

What should a custom software development contract for offshore/nearshore teams include?

Payment terms

Any software development contract includes such clauses as payment terms, which outlines developers’ rates, service fees, payment schedule, etc. 

For you as a client, it’s necessary to have a crystal-clear understanding of the billing process and where to seek assistance in case any issues arise. You should also know when exactly to expect an invoice to be issued and when the payment needs to be settled. For example, all our clients at nCube are billed on a monthly basis. The invoice typically entails your developers’ rates and hours each team member worked in a month. 

When it comes to software development contracts, payment terms should also include a clause regarding undue or unfulfilled payments. The responsibility for such a mishap varies from company to company, so it’s best to outline this situation in advance. 

When hiring a dedicated team through a vendor, you probably want to ensure that the developers are retained for you 5 days per week, 8 hours per day. The vendor usually guarantees that the team members will dedicate a full-time workweek to your project, so you can count the cost of the team per month in advance. 

READ ALSO: How to Build Your own Remote Software Development Center

Intellectual property rights in a software development contract

Generally, Intellectual Property in software development includes the source code, solution, and know-how generated by your team. Here are the main agreements that protect a client’s Intellectual Property during the software development process:

  • Non-Disclosure Agreement. Usually a client suggests signing an NDA at the initial steps of the partnership. By sticking to an NDA, you ensure that the ideas, inventions and solutions won’t be stolen with impunity. Most importantly, with a bastion of security like a well-rounded NDA, you can be sure everything you discuss with the provider and team members will be fully confidential. We at nCube regard an NDA as a key means of protecting your Intellectual Property rights and always include it in our software development contract. At our customers’ request, we are ready to sign an NDA even before the initial call.
  • Proprietary Rights Agreement. As a means of protecting your Intellectual Property rights, your software development contract can also include Proprietary Rights Agreement, which clearly states the owner of the Intellectual Property. We at nCube guarantee that the client is the sole owner of all solutions, code and ideas generated by their team, as in they are considered to be the author of work.

Essentially, your provider should take obligations to protect your ownership of Intellectual Property. If you have any additional steps your company needs to take to protect your company’s Intellectual Property rights, don’t hesitate to include them in the software development contract

Privacy and confidentiality of data

The work of many developers suggests accessing your company data or personal data that belongs to your clients. The laws and rules of data protection are strict, and thus it’s necessary to include the regulations concerning privacy and confidentiality of data in your software development agreement checklist.

When working with a provider, the exact data protection strategies are typically outlined in a custom software development contract with each individual client. Signing this contract imposes obligations on the vendor to provide information on how your data will be stored, accessed, and transferred. The contract also includes data protection settlements after the works are finished.

When building a team through a provider, ensure that they put in due effort to run their business in line with the data protection regulations ruling in your countries, such as GDPR (EU), PIPEDA (Canada), and HIPAA (USA). 

READ ALSO: HIPAA Compliance Checklist for Offshore and Nearshore Companies

It’s also crucial to ensure that a vendor and the team they provide are aware of and follow the requirements of your company’s privacy policy. So, don’t forget to put this staple on your software development agreement checklist.

Notice period

In a custom software development contract, a notice period assumes the amount of time the client gives to the provider to find a replacement for a team member or dismiss one. 

Notice period should be a part of your software development agreement checklist for one reason –  it guarantees a continuous and sustainable software development process. You and the provider should agree on suitable notice periods to safeguard your work from the consequences of abrupt staff attrition and, if needed, to ensure a smooth knowledge transfer to new team members. 

Team scaling and reduction are typical situations in many projects. As your business grows, it’s natural that you may need to bring in more hands. Notice periods are often dictated by the complexity of the project, access to local pools of tech talent, and the provider’s capability to scale the team during a reasonable time-frame. On average, a notice period is one month, but it can be extended for the reasons we mentioned above. 

Contract termination 

Another significant part of a software development agreement checklist is associated with disbanding your external team. The sooner the client informs the provider about their decision, the better it will be for the knowledge transfer process. The time to finalize work often depends on how long the team has worked on your project. If you’ve worked with a provider for years, as many of our clients do, it may take weeks to get their knowledge passed on. Thus, a solid custom software development contract should take this point into account as well. 

So, what is in a software development contract template for the UK

This is a popular question among businesses located in the United Kingdom. When it comes to a software development agreement checklist for businesses in the United Kingdom, a typical one includes the following clauses:

  • Payment terms
  • Intellectual Property rights
  • Privacy and confidentiality of data
  • Notice periods
  • Contract termination 

However, depending on your business needs, a software development contract template for UK firms may also include such clauses as Scope of Work, Progress Reports, Acceptance of Work, and more. 

READ ALSO: Taking your Big Data Offshore: Why You Need an External Big Data Team

A well-rounded software development agreement checklist paves the way to an adequate contract that ensures the safety and transparency of building your external team through a vendor. It can also be a great kick-off point for a long-term partnership with your provider. We’ve outlined the basic points a business should cover in their custom software development contract. If you have any questions, contact us and we will be glad to advise.

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