Want to outsource your software development? If so, you might want to educate yourself on the essential documents for a good working relationship with your outsourced development team. Also, if you want to learn how to draft these documents in the most comprehensive way, then you've come to the right place. This article will discuss four critical documents that you should know about if you outsource your software development. We will also detail the structure of each one and guide you on how to draft the documents.

Key Documents in Software Development Outsourcing

The following are some of the crucial documents to know about software development outsourcing.

1. Non-Disclosure Agreement (NDA)

One of the essential documents to know about during the recruitment process is a Non-Disclosure Agreement or NDA when outsourcing your software development. This document is typically signed by two parties (which can either be two companies or a company and an individual) that are going to exchange classified information. An NDA protects one or more of the parties from having their sensitive information disclosed to external parties.

When drafting a Non-Disclosure agreement document, there are specific components that must be present. They include:

A precise definition of confidential information

Usually, with software development, materials, and information is classified as confidential or non-confidential. If you have not already made this distinction, you should do so before drafting your NDA. Confidential information is typically procedures, processes, passwords, databases, source codes, strategies, and architecture. Executing this stage of defining confidential information in your NDA is important because it lets the other party know the information they are not supposed to share.

Confidentiality terms

Your NDA should also include a set time frame that details how long the information should be kept confidential. The time frame you select is important. Ideally, the period should be long enough to keep sensitive details about your business safe but short enough to be reasonable and not scare away the other party. In the world of software development outsourcing, the confidentiality period usually ranges from a year to three years.

Disclosure clause

You may not want your classified information shared with the general public, but there are other parties you may want to share it with. Your NDA should clearly state the parties the sensitive information can be shared with. This is commonly referred to as a disclosure clause. These parties may include but are not limited to business partners, freelancers, and employees. All these details should go in your NDA.

Use of confidential information 

The document should state how the other party can use your classified information.

Legal obligation to disclose

The disclosure of sensitive information is sometimes necessary in the case of legal proceedings or other legal situations determined by the law. Because of this, your NDA should include a legal obligation to disclose. This simply means that the other party is free to share sensitive information in the court of law if necessary, without facing ramifications.

The return or destruction of confidential information

This part of the NDA should detail what each party should do with the classified information once the partnership is over. The data can either be returned or destroyed, but you should also account for all storage bearers like USB and hard drives.

The remedies clause

This section details the consequences or form of compensation to be paid if a party should breach the NDA.

2. Master Service Agreement (MSA)

If a company works with a client repeatedly, a Master Service Agreement or MSA is signed. This agreement permits the reduction of legal expenses and promotes the provision of services. When creating your MSA, it should include the following:

Provision of services

This should state the order in which services are provided.

Acceptance and payment for services

This should detail any fees, taxes, timesheets, or charges related to the procedure or services acceptance.

Terms and termination 

This should define how long the MSA is valid and the conditions necessary for the agreement to be terminated.

Intellectual property rights and ownership 

This describes any intellectual property involved and how both parties can manage it.

Confidentiality

This should state any confidential information and how both parties should handle it.

Liabilities, warranties, and representation

This should state any party warranties, liability field, and representations involved, i.e., people involved and participating in the project. These can be employees, business partners, etc.

Indemnification

This should detail how both parties plan to compensate each other in the event that they go against the agreement.

Notices

It details how the MSA will be delivered and what notifications of delivery are to be received.

Miscellaneous

Any additional information should be included in this section. Things like disputes and their resolution, law benefits, data protection, assignments, amendments & modifications, and how they should be handled by both parties (amendments should not be made without the agreement of both parties), and severity clauses are the most common things found in this section.

3. Statement of Work (SOW)

In the business of software development and outsourcing, a Statement of Work document, better known as an SOW, is one of the essential documents needed. Typically, in an SOW document, different parties identify all the details associated with a project. Things like project stages, features of the software, acceptance criteria, and possible risks are also detailed in this document.

When creating an SOW document, you should include a diagram of the CI/CD pipeline (which automates your software delivery process), the development procedures schedule (which incorporates details like visits, communication within the project, approval, objection, reporting procedures, and order, deploying and closing the project). In addition to these, an acceptable Statement of Work should include other details such as screen resolution, browsers, list of devices as well as any versions of these used for testing purposes.

These are some of the core details that are often included in an SOW document. However, you can also have a special attachment with your document. In this special attachment, you can provide information related to any agreed-upon payments and payment models. Here, you can indicate whether the project is a fixed-price project or if the company will pay according to time and materials applied. 

Asides from payment information, you can also mention the force majeure conditions, any significant risks involved in the project, and how this could influence the implementation of the current task at hand (not the total project).

4. Data Processing/Confidentiality Agreement (DPA)

The purpose of a Data Processing Agreement is to regulate any data processing done by the parties involved in a project. A DPA also governs the relationship between the parties. In simple terms, a DPA document is an agreement between the data processor and the data controller. For example, with software development outsourcing, the contractor is the data processor, and the client is the data controller.

A DPA is essential because the GDPR requires data controllers to take action to protect any personal data they handle. If a data controller then outsources data processing activities, they have to show that their data processors can guarantee that they will protect the data to comply with the GDPR. During software development, a vendor would typically have access to sensitive data like customer information and processes. In that case, a DPA is necessary to agree upon how this data is stored, processed, and protected. Hence, if you are outsourcing to a third-party development team, you need to sign a DPA with that third party.

Before signing a DPA, you should choose data processors that can implement the necessary measures to reduce the risk of a data breach. Also, select processors that can implement sufficient steps to ensure that the effect is deceased even in the event of a data breach. They should also be able to inform you of the breach as soon as possible. All these steps are necessary because if there is a data breach under the GDPR, even if it is the data processor's fault, the data controller can still be held responsible.

Unfortunately, a lot of companies tend to ignore a Data Processing Agreement document, which can leave sensitive data at risk of being exposed or shared with the wrong people. It is necessary that any software development company that outsources signs a DPA.

Conclusion

All the documents described are essential and necessary when establishing a relationship with an outsourced software development team. They not only protect you and your data, but they also cover any other parties involved in your project. All the information stated in these documents ensures that your project is executed correctly and that your team of outsourced developers is protected from exploitation. If you want more details on how to draft these documents, you can search online for easy templates that would guide you through creating your version.