What are the best practices for software contract negotiations?

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What are the best practices for software contract negotiations?

I made a framework for negotiating software deals. It's made of 9 categories of questions you answer from your point of view first, and research possible answers from your negotiating partner's POV.

This defines your scope. Answers fit one of three groups:

  • Ones you care about, that you will fight for
  • Irrelevant to you, which you can give up in negotiations
  • Issues relevant to both parties - these are going to be the main issue of your negotiations.

Here are the points that should be covered during negotiations:

1. Terms Of Payment

  • Will the client pay anything in advance?
  • If so, what’s the size of the advance?
  • When will the advance be due?
  • How much time passes until you issue an invoice?
  • What events trigger issuing an invoice? (first of the month, after the deal is signed, when the project is ready?)
  • When will the main payment be due?
  • Are you going to add interest (and how much?) for exceeding the due date of advance/main payment?
  • When should you deliver the service/product?
  • What if there’s no contact with the client after finishing the project and before reception? It’s seen as delivered after 5 days with no reply?
  • Are there going to be penalties for missing deadlines?
  • Which deadlines? How big the penalty? How will it be invoiced?

2. Price

  • Fixed price? (payment for the whole project)
  • Time and materials price? (payment for costs and hours spent on a project)
  • What currency will be used to settle the payment?
  • How much will they actually have to pay you?


3. Range And Additional Services

  • What is the full range of services you can offer?
  • Partial reception or full reception?
  • Are you going to offer additional services?
  • Will they be included in the price, or paid for separately?
  • What additional services can you offer?
  • Are you going to offer a framework agreement for additional hours?
  • If not – what if additional hours will be necessary?
  • Should additional hours be at a preferential price?
  • What technologies / methodologies are going to be used in your process?

4. General Issues

  • What should be the localization of a lawsuit, if there is one?
  • Based on which country’s law will it be processed?
  • Is there a limit to potential claims? If yes, what is it?
  • Will the client finance the deal through outside financing, like VC (venture capital) money, leasing or European Union funds?
  • Who is granted the copyright to the final product?
  • Are there 3rd parties involved? What are their obligations?

5. Warantee, Servicing

  • Will you offer a time period in which you’ll provide fixes for any bugs?
  • If you are, how fast will you fix them?
  • For how long are you going to offer a warantee?
  • What’s the range of the fixes you offer?
  • Will you use an SLA?

6. Client Obligations

  • Should they pay for a developer’s time, if the client is running late for a meeting?
  • What does the client deliver before and during the project?
  • Is the project deadline extended if the client doesn’t deliver resources on time?

7. Maintenance

  • Is it going to be necessary?
  • How much time should be set aside for it?
  • What’s the length of the maintenance deal?
  • What’s the hourly payment rate?

8. Additional Benefits

  • I’ll be more willing to give a discount, if you buy 3 things instead of 1.” Based on what they buy, will you give a discount?
  • If not a discount, maybe offer more value at the same price? (eg. throw in a few hours of training)
  • In exchange for prefential terms, could the client referr you to other, similar companies?
  • Can you brag about the deal with a case study or press note?
  • Can you count on a testimonial or references?
  • Are they up for cross-promotion (a webinar/special event?) (for instance, two polish start-ups – Prowly (PR app) and iTaxi (kinda polish Uber), did a campaign together where they offered free courses around Warsaw for PR specialists, during which Prowly’s app was presented)

9. Other

  • Does the client pay for the time devoted to communicate?
  • Do they settle any potential costs of transportation and hotels?
  • What tools with both sides use to communicate and measure/document the progress?

Once you know your answers, you're 100% prepared to negotiate. Having clear priorities is an important part of proper negotiating.

Source: quora

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