Accelerating projects beyond the abilities and expertise of internal teams, cutting the cost of IT services and increasing operational efficiency - your business can reap substantial benefits while outsourcing your software development.

In the previous articles of the Outsourcing Challenges series, we've covered the best practices of hiring an effective offshore software development team. You can also find out how to choose an optimal team composition and transfer your knowledge to the new team for a smooth start and trouble-free project delivery. Check out the links below.

However, to ensure your outsourcing project is a success, you need to set the things up correctly from the very start of the cooperation. Failing to notice red flags in your software development contract can put your organisation in a bind. The main takeaway is that you need to make sure your software development agreement correctly defines two critical aspects:

Project governance. Who is responsible for project management? In other words, who is going to overseeing the project in terms of scheduling and delivery timeframe? Scope of work. The services and the deliverables your vendor is going to provide.

If your contract doesn't provide clear answers to these questions, you risk being charged a substantial amount in additional fees with no legal recourse.

Three types of software development contracts

A software development contract consists of legal documents that contain specific details of what your organization is expecting from a vendor. Types of arrangements can vary depending on the engagement model you choose for your project. These models typically fall within three types: