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I would like to get the following information related to outsourced project.

  1. What are the best practices to follow for the payment plan/structure when you are working with outsourced development firm?

  2. Are there any standard templates available for software development contract that I can use?

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3 Answers

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  1. The best practice might depend on what fits your needs the most. A fixed fee plan gives you budget predictability, which is perhaps the most advantageous to someone in your case. Some typical structures that come with that are:

    • Partial payment up front (like an initial deposit) and partial payment upon delivery. Some break it up into 3 or more payment milestones too.

    • Change requests. A fixed fee project requires you to know exactly what you want built. If you change the requirements during development, you'll incur a change request, which will cost you additional money. Typically, changes that occur after development has started are expensive.

    • Escrow. I definitely agree with 99desk that you should use an escrow system with which to pay your outsource agency.

  2. I've found some nice software development contract templates on http://www.gantthead.com/ before. They need some cleaning up and revisions, but you can start with those.

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I can also recommend a book from Nolo - "Legal Guide to Web & Software Development" - that comes with several customizable contract templates. – Brandon King Dec 30 '10 at 22:48
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The best method for payments on Out Sourced projects is ESCROW system. All the websites as Elance, Guru, 99desk.com, Getacoder.com support this method. Try posting your project on these websites. Its free to Join and post your JOB. With ESCROW your funds are 100% safe.

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The risk with escrow is if you have not specified your requirements carefully enough. Then you might have to pay without having gotten something of value to you. – David Jul 13 '10 at 0:06
Bad news: and rightly so. Or do you believe in changing onrtracts AFTER work has been done? – NetTecture Jul 28 '10 at 3:03
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A contractor shouldn't be penalized because YOU failed to give proper requirements. Properly specifying the requirements is on the poster. And if the contractor performed the work as specified, they should get paid for their time regardless of whether or not it was what you had in mind. – Zuly Gonzalez♦ Oct 9 '10 at 0:48
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-Always look at the reviews / work from the developer you want to hire. -Don't hire a new developer with no record (You don't have to be his "genuine pig" -Don't work with payment plans if you have never worked with the developer before. (I lost $10k on a project because the developer stopped working after 75% of work, and the new developers didn't understand the code) -If it's a big project with a lot of bugs and maintenance then http://www.activecollab.com/ is a must have software to handle 1 or more projects. This software alone saved 10's of hours.

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