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Computer Purchase and Software Development Contracts

Many business people facing computer related acquisitions are uncertain as to when to use consultants and attorneys familiar with information technology issues. Clearly, minor acquisitions involving routine functions and small dollar amounts do not warrant use of consultants and attorneys. Given the wide availability of specialized off-the-shelf software, software development contracts are usually limited to large and unique business needs. Similarly, there are expensive and complex software programs which have been developed for specific industries but which must be customized and integrated for each particular customer. These large software projects as well as all large hardware and operating system implementation contracts are fraught with potential risk for both the vendor and the user.

Any business person who has been involved in a computer hardware or software acquisition knows first-hand the dangers and frustrations of this process. All too frequently, there is at least one very expensive and unsuccessful foray into software and hardware acquisition without the benefit of good business and legal advice. Typically, the result is tens of thousands of dollars lost on either an unfocused software development effort or a program which for a variety of reasons does not meet the user‘s needs.

Proper planning and careful contract drafting are absolutely essential to the success of these projects. Early consultation with attorneys and consultants familiar with information technology issues can help avoid losses to both vendors and users as well as assure a long and mutually beneficial business relationship. While the discussion here primarily involves software development contracts, many, if not all, of the same factors come into play in systems integration contracts. There are certain steps which are critical to most information technology acquisition projects:

  1. evaluation of business needs;
  2. development of functional specifications;
  3. preparation of a request for proposal;
  4. drafting the acquisition contract.

This is a summary of a more detailed article on computer purchase and software development contracts. For additional information please contact Susan D. Baker at sdbaker@nilesbarton.com

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