Website Development Contracts, Part 1: How to Avoid Major Disasters

This is Part 1 of a new series providing advice about website development contracts for businesses engaged in e-commerce.

When entering into website development contracts, the more you know the more likely you will be able to avoid contract disasters that could prevent your website from launching on time or working properly.

There are many stories about failed software development projects, not just in connection with website development contracts, but with all information technology projects. Through this series, we hope to provide some insight into common pitfalls in the process, explaining terms and applications to arm you with the knowledge you will need to negotiate these types of agreements and protect your business.

Since no one wants to fight in court about a failed website development project, this series will give you some pointers on how to achieve success.

1. Do Your Homework Before Selecting a Vendor

The best way to learn about an IT vendor is to speak with its current and former customers to see if they are happy campers or not. Just as you would ask a potential employee for references, ask your potential IT vendors for the names and contact information for all of its customers. If you were to ask for “three or four references,” then the IT vendor most likely would provide only its happy customers. With a list of all customers, you can inquire selectively.

The IT vendor should not be part of your conversation with its former customers because it is less likely that the customers will be as candid.

You can ask the customers if they have advice about how well the IT vendor estimated completion of phases of the project, whether there is one specific person who needs to work on the IT project, how well the contract negotiations went, whether more training was necessary, and the like.

Also, make sure that the IT vendor provides the names of all lawsuits (or arbitrations) it has been involved with in the past. If you do not have complete trust in making that request, it might be worth your time to do a deep dive on the Internet to see if the vendor appears in any news stories or articles about lawsuits (or arbitrations).

2. Review the IT Vendor’s Proposal and Ask Questions

Since the IT vendor’s proposal typically will be prepared by its marketing folks, it is possible that the proposal may lack some technical details, be incomplete, or be overly glossy. After reviewing the proposal, it is good idea to have a meeting with the IT vendor’s technology folks so you can ask questions about the schedule of events, cloud hosting, intellectual property and related topics.

During these meetings, integrate your findings from your discussion with the vendor’s current and former customers — particularly if there were any issues flagged concerning scope of work or the planning process.

For instance, if you learn from existing customers that the IT vendor does not do a great job on preparing wireframes, perhaps your contract should allow you multiple reviews before wireframes will be accepted.

3. Consider Website Requirements

You surely will want to make sure that your new website allows you to promote your products and sell them in a convenient manner. However, you also need to have proper access to your back-end accounting, CRM (customer relationship management) and related technology.

You need to make sure the IT vendor has the appropriate experience to connect your new website with your backend system requirements properly. A number of website development projects fail because of the failure to properly connect to the back end.

Of course, if you are building a new website, you likely will need the IT vendor to build your back-end technology. In these situations, it is critical that you learn how well the process went for former or existing customers. Their experience can help guide you through the process on the front end, to make sure you have a successful front- and back-end connection.

Websites are better when they are updated routinely. Customers will be put off by a website that looks 10 years old. Part of your contract should be a plan to reskin your Website every few years so that it does not look stale.

If you are not going to manage credit cards and be PCI-compliant, you need to understand the best options that the IT vendor can provide for you to handle credit card payments. This also means you do not want to capture PCI customer data on your website so you do not have to be PCI DSS compliant.

4. Review the Proposed Contract and Statements of Work

Since there are no “standard” IT vendor contracts or statements of work (SOWs) you will need to take the time to conduct a thorough review of these types of agreements to ensure you are properly protected and have minimized your risk.

This website development series should help you learn more about legal issues to consider and what to negotiate. Please stay tuned for future installments, which will include topics such as negotiating cloud agreements, ownership of IP, indemnification, lawsuits and arbitrations, and related topics.

Of course, it would not be bad idea for you to engage a lawyer with experience in drafting and negotiating website development contracts and SOWs.

Read Part 2: Who Owns the IP on Your Site?