Software Specs

Software specifications are the software equivalent of a builder's blueprint. They attempt to define the software to be created and provide a guide for determining if and when the software has been satisfactorily completed. The more complete the specifications, the less likelihood there will be misunderstandings which can lead to client dissatisfaction, withholding of payment, and possibly litigation. The specifications are really the heart of any software development contract.

There are many ways to write specifications. One way is first to draft a "functional specification" in nontechnical language that the client has some hope of understanding. The developer may also prepare a prototype or demonstration program to show the client how the software will look and function. Later, the developer should prepare a far more detailed and precise technical specification.

Payment Arrangements

There are two basic ways to pay a developer for creating custom software: a pay-per-hour (time and materials) agreement, or a fixed price agreement.

Under a time and materials agreement, the developer is paid for the time spent and actual costs incurred in creating the software. This payment scheme is obviously more favorable to the developer than to the client. Unlike in a fixed price contract, the developer is assured of payment even if the project takes longer than originally anticipated.

Under a fixed price agreement, the developer is paid a fixed sum for the entire project. In theory, this payment scheme favors the client by giving certainty as to what the project will cost. Moreover, if payments are tied to the progress of the developer's work, it gives the client substantial leverage to insist on timely and successful completion of the project.

However, as a practical matter, fixed price agreements usually do not end up favoring the client as much as one would think. If it turns out that the fixed price originally agreed upon will not provide the developer with fair compensation because the project ends up taking too long, the client will probably end up agreeing to pay the developer more money. Otherwise, the developer may quit or end up delivering a hastily completed and shoddy product.