The main agreement, usually called the Master Services Agreement or MSA, covers basic legal terms and definitions. It is the contract that governs the relationship between your company and the outsourcing vendor and includes: independent contractor relationship, intellectual property rights, assignment of copyright, non-disclosure obligations, term and termination, no conflict of interest, non-interference with business, force majeure, assignment, governing law, and other contractual clauses.
It’s important to choose the pricing model that works best for your company. Fixed Price Models theoretically have less risk to your budget by withholding payment until software development milestones are completed. The problem is the features and functions of new software applications are not well-defined and therefore a fixed-bid cannot be accurately estimated.
Most software outsourcing engagements use a dedicated team of developers and the outsourcing company is paid monthly for their work. This is fair because their work is usually performed in sprints using agile methodology so you receive the highest priority features and functions first.
Finally, Incentive-based and Shared Risk-Reward models offer flat rates with increasing payments as goals are met. They may require greater oversight and higher risk, but can be beneficial to the quality of your software and your outsourcing partnership.
Define the type of team that will work best for your engagement and the amount of “hands on” you’re able to commit to. A dedicated team will integrate with your in-house development team, while a managed team functions independently with you as the product owner while the development occurs elsewhere.