Staying out of Trouble in Software Development and Technology Contracts
In the famous words of Marvin the Martian, “Oh, drat these computers; they’re so naughty and complex, I could pinch them”.
Oct 18, 2006
Introduction
In the famous words of Marvin the Martian, "Oh, drat these computers; they’re so naughty and complex, I could pinch them". Things may have moved on in the industry since then, but it is a regular occurrence that software developers’ contracts should be ‘pinched’. Any technology contract should allow the software developer and customer to develop their relationship over time, but many don’t. Technology and intellectual property lawyer, Leigh Ellis offers guidance on the areas to watch.Staying out of Trouble
Whether as a buyer or seller of software services, if you have been in the software development industry for any stretch of time you will be well aware that contracts can go wrong for both commercial and legal reasons.Today’s technology services cast a wide net. They not only incorporate software license agreements but also embrace security systems, supply chain management, billing, customer relationship management, communications software and a host of others. Basic principles of contract law apply to all contracts. When products and services vary, so should the contract to deal with them properly.
There are a number of areas that should be taken into consideration in each and every contract to avoid problems arising and make the most of the relationship – for both the supplier and customer. But too often these issues are not dealt with adequately or worse, ignored, which leads to uncertainty, disputes and potentially the ultimate failure of an otherwise profitable relationship. Some of the most important, yet often neglected areas come under the following headings.
Defining the Services
Behind price, the most important part of a technology contract will be the services to be performed. System specifications and performance capabilities should be stated clearly and precisely. Ambiguously worded requirements are an open invitation to ‘scope-creep’ and a permit for other uncertainties to be imported, so absolute clarity is needed in defining:- What services are to be performed?
- When they are to be performed?
- By what means can it be unequivocally stated that the particular contract works should be and are complete?
- When does the supplier become entitled to payment?
It makes sense to plan the implementation over time, rather than expect an instantaneous and flawless performance at go-live. And to add a context and background to the performance-to-contract, it will assist to name the operating environment, any existing or new hardware, network infrastructure and database management systems involved.
Updating the Services
In outsourcing and procurement contracts, updating technology and service performance on a periodic basis usually makes sense for the introduction of new technologies over the life of the contract. Benchmarking service performance provides an objective basis to assess industry standards over time and sets a reference point for improvements to services.Catering for service improvements helps preserve the relationship, as the customer receives increasing productivity and return on investment. Services provided under a contract otherwise typically deteriorate over time, leading to customer dissatisfaction. In most cases, the customer should be entitled to receive the benefit of improvements to technology over time.
Flexibility should be built into the agreement to vary services where hidden costs arise. Tied in with this concept is the ability for the parties to change the services delivered over time, and setting out a change-control procedure in the contract assists for this purpose.