At this point, you’ve identified an agency that checks all of the boxes and you want to move forward. The next step is paperwork and logistics, which can be intimidating for a lot of people. In this article, we explain a few different project types for software design and development and the pros/cons associated with each.
Fixed scope or fixed bid
This type of project keeps the scope small, focuses on outcomes, and requires that you understand the change management process. Fixed-scope contracts can present challenges in effectively collaborating with your agency down the road. Changes that weren’t explicitly outlined in the contract may be costly in both time and money. These types of fixed agreements can be good for smaller engagements where the time line is short and you know exactly what must be done.
If you move forward with a fixed bid try to focus on the "fixed" nature of the outcomes of the project. In other words, define what you need the product to do rather than a features list with an explicit breakdown of function. These specification documents are usually irrelevant or outdated after even just a couple sprints of learning.
Duration & price
These projects are managed by duration. Estimations and scope are only used to inform the client and product team — not direct it. With duration and price engagements, changes don’t require costly addendums since product requirements are not ingrained in a fixed contract. These agreements are agile in nature, better for long-term engagements, and provide room to adapt to market feedback. Because software development is so complex, these agreements are ideal.
Note: This is the type of contact we use. This empowers us and our clients to operate as partners, working towards a shared understanding we develop at the onset of our partner-driven relationship.
With this option, you might have both a fixed scope element and time and material element. It’s important to understand what’s fixed and what’s flexible to ensure expectations are aligned on both ends. These engagements allow the agency to achieve a better match between the requirement and how the work is priced. You can be billed by milestone, outcome, time spent, or deliverable, so make sure that’s hammered out prior to signing anything.
Involve your legal team early
Once you’ve landed the engagement type, the next step is to involve your legal department as soon as it makes sense. Looping them in sooner rather than later helps streamline the process and makes things far more efficient. The same thing could be said about the accounting department, depending on your processes.
Out of the gate, look to get a Mutual NDA (non-disclosure agreement) completed. The NDA will not take any time at all, and you can continue talking with greater transparency.If you’re just chatting up front to vet the agency, it’s not absolutely necessary, but as soon as you want to go a step deeper, it does help to have that kind of paperwork in place.It’s pretty standard practice, but some agencies fear it keeps them from talking to multiple potential clients. Set expectations up front.
The Master Services Agreement, or MSA, is a larger document that does exactly what it says; it is the main source of truth for the working relationship. This is the guiding legal document between the two organizations.Review and feedback between both parties on this document often takes more time than expected. A more mature agency will likely have refined their MSA to a really good place to work with companies of all types and sizes.
When reviewing your engagement contract, there are a few things that are often included:
- Payment terms & price-setting mechanisms
- Service-level requirements/SOW
- Legal liabilities
- Intellectual property rights
- Exit strategies and stipulations
- Model for governance over the agency
- Technical specifications(ie: status reporting)
- Payment schedule
- Vendor audits
Note: Your legal team should have better insight into how each of these should be established with the agency.
Mutual Action Plans
A mutual action plan is a document shared between the potential client and the agency that collaboratively outlines key milestones and relevant resources. At Crema, we create these together with some of our clients to set expectations and navigate the process together.
Next steps, respective dates, and a description of upcoming steps are laid out in a list format as a visual for where you’re at in the process. Having this document to reference helps create a shared timeline between the two parties.
Questions or comments for us?
Perhaps the timing or budgets don’t line up to make an agency partnership possible right now, but that’s quite alright. You can always make a note and follow back up when the stars align! If you have any questions about hiring a digital product agency, get in touch.