What Is a Statement of Work (SOW) in Software Development?

Before a software development project can begin, all involved parties must understand every aspect of the project– including objectives, methodology, payment, deadlines, requirements, responsibilities, and more.

A statement of work (SOW) in software development covers every little nuance of the agreement between a vendor and the client to ensure no confusion or miscommunication and streamline the process.

The full extent of a client's collaboration with a software development company is outlined in this document, so it's vital that the information included is highly specific and simple to understand. Let's dive into the details about SOWs to help you write or review a statement of work.

What Is a Statement of Work (SOW)?

A statement of work (SOW) is a document used in project management that narratively describes a project's work requirements. Outlined in this document are the project-specific activities, timelines, and deliverables. In short, all of the details and expectations of collaboration between a vendor and a client before software development begins are written into this document.

Once an SOW has been written and agreed to by both the vendor and the client, both parties will sign in order to begin the project.

The Purpose of an SOW Document

It's essential that every person involved in a project is on the same page when it comes to objectives, methodology, responsibilities, requirements, deadlines, and payment. In order to minimize the occurrence of confusion or conflict between a client and a vendor, the statement of work puts every aspect of the agreement in writing.

This document can also provide additional information, such as hardware and software restrictions, security considerations, penalties when deliveries are late or of poor quality, and post-project support. Beyond that, there are often also clauses that outline under what circumstances the contract can be terminated early.

An SOW document needs to be very clear and written in a way that leaves little room for interpretation. Even though it is often viewed as a business document rather than a legal document, it's still essential to make sure that the full extent of your collaboration on a project is explicit and easy to understand.

The SOW can help to protect the interests of both the client and the vendor. On the client side, they can know for certain that the vendor understands what they are looking for and in what time frame. On the vendor side, it helps to protect from scope creep and the fallout from miscommunication.

The Structure of an SOW For Software Development

A statement of work is vital to tie all of the project characteristics and processes together while setting clear boundaries. It's important for an SOW to be both very clear and simple to understand to ensure that the software development process is as seamless as possible.

In the world of SOWs, the more information, the better. There can be some variety when it comes to the format of these documents, but certain sections are almost always contained in the document. Let's look at the structure of an SOW to gain a deeper understanding of this document's information.

Introduction

The first section of your statement of work will list all of the specialists involved in the project and identify the objective.

You'll want to include the date and location that the document was written to ensure that there is no room to question the legitimacy or credibility of the document down the road.

Project Background

This is where relevant background information, documentation, specifications, and reference info can be listed. If aspects of the project are already being worked on or completed, they should be mentioned here.

This part of the document helps ensure that the vendor understands the client's needs.

Purpose

Next, you will want to clearly understand the project's objectives and goals.

The collaborative project between the client and the vendor will be more effective and consistent when the expectations are laid out in simple terms.

Scope of Work

Both a statement of work and a scope of work– two phrases that share the same acronym, by the way– refer to statements about the project. However, the statement of work is the complete document that contains the goals, schedule, guidelines, and broadly all of the details about the project, while the scope of work is just one section of this larger document.

In this section, you'll find all of the elements of the project. This includes the reach, range, gamut, dimension, and spectrum of the work that is being agreed to in order to increase project understanding.

This is one of the more complicated parts of the statement of work, so it is typically a good idea to break down this section into a timeline with several phases.

These are:

• The project discovery phase
• The application development phase
• The testing phase

You can break these phases down into smaller tasks if the project is incredibly extensive and complex. It's also important that specific information is included in the SOW, including:

• Personalized tasks
• General budget overview
• Each party's responsibilities
• Expected deliverables
• Key figures involved in the project
• Conditions regarding potential issues in implementation
• Certifications or requirements for subcontractors or developers

Location of Operations

It's also essential that the location of where the work will be done is outlined in the document. If your project is being outsourced to a vendor with developers and engineers from countries around the world, it's important to know where they are operating from and which time zones they are in. This is important for the client to know but also vital because of the reality of differing jurisdictions.

If the client desires face-to-face meetings with representatives from the software development company, the location of these meetings should be specified in the statement of work.

Standards

Now that the nature of the product is spelled out, it's time to talk about the actual process of operations.

This section will include information about industry standards that developers will be expected to conform to, the limitations of the technology being used, details about the tech used for testing, how the client and the vendor will communicate with each other, and more. This is also where you will find information about bonuses for additional work or penalties for missing the deadline.

Deadlines and Schedule

It's important to have explicit deadlines and timetables so the software development project can move forward steadily. The last thing a client wants is for their software development to stall in a way that negatively impacts their entire timeline.

At the same time, a little bit of wiggle room must be left to ensure that there is a reasonable amount of space to deal with obstacles and the inevitable development trial and error.

Both the client and the vendor will want to have a list of milestones and tasks that they provide with dates for each one. It's also essential to create an understanding of when performance reviews will occur.

Finally, the total duration of the contract needs to be written into the document. This is also where the maximum payable operating hours of the dev team can be found.

Monitoring

In order for the client to understand whether deadlines are being met, the vendor will give regular reports. This helps to ensure that the client understands the progress that is being made and allows them to have some control over the development process.

Management software such as Basecamp, Jira, or Asana can be used to supervise and review the project. This aspect of the process shouldn't be left up to assumption, however. The apps and tools that are used for monitoring should also be written into the document.

Acceptance Criteria

This is the section of the statement of work that outlines what the project will look like when the job is complete. This means that both success and failure should be clearly defined. The criteria used to determine whether tasks and deliverables have been completed successfully should be described in detail so there isn't any disagreement by either party.

This is also where you can find information about when the client can terminate the agreement without paying the full agreed amount. Additionally, the acceptance criteria helps mitigate the risks associated with change requests.

Finally, the submission process will also be included in this section, as well as the individuals allowed to accept and review the deliverables sent by the vendor.

Payment Model

Now it's time to talk about dollars and cents. There are two common pricing models that are used when outsourcing software development. These are fixed-priced contracts and the dedicated development team model.

Fixed-price contract model: This is a suitable model for smaller projects and clients with clearly defined requirements, specific delivery dates in mind, and a thoroughly detailed plan. Payment can either be paid in full when the project is complete, in portions when certain milestones have been met, or by an agreed-upon schedule.

Dedicated development team model: When projects are more complex or long-term, this is an appropriate model. Usually, the client will pay for the hours of work developers have put into the project on a monthly basis. This model is suitable for projects that don't have a well-defined scope of work, as it allows for rapid changes and effective management and monitoring on the client's part.

Miscellaneous Information

Finally, there's a good chance that there will be additional important information for software development that doesn't neatly fit into any of the above categories. What is written in this section, if anything, will depend entirely on the circumstances of your project and agreement.

For example, if the client and vendor expect to meet in person, you will want to outline how travel payment will be handled. This is also where you can talk about security standards and regulations, liability caps and warranties, whether support will be available after completion, and more.

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Who Should Write the Statement of Work?

The outsourcing vendor typically writes an SOW in software development. This is usually included as a part of the documentation package that is given to the client.

That being said, this doesn't mean that the client doesn't have any say in what the SOW contains. The customer can review and discuss the document with the vendor, and revisions can be made to reflect the interests and wishes of both parties.

Tips For Writing an SOW

If you are tasked with writing an SOW or going through an SOW provided by the vendor, it can be useful to understand how the most effective SOWs are written.

Keep the Lines of Communication Fully Open

The communication that precedes the drafting of the SOW is the most important part of the process. If the lines of communication aren't fully open leading up to the creation of the SOW, it likely won't reflect the needs and objectives of both the vendor and the client.

Keep It Simple and Specific

It's important that everyone involved in the project is able to clearly understand it. This means that terms should be chosen specifically and precisely, and success criteria should be clearly defined. When there is a task to be completed, who is responsible for it and when it is due should be written into the SOW.

One of the goals of this type of document is to reduce the occurrence of miscommunication, confusion, and conflict. For this reason, it should be both specific and easy to digest.

Tailor the SOW to Your Project

It can be useful to look at statement of work templates, but it's important to tailor your document to your specific project. Every software development project is unique, and it's essential to make sure that all of the important details are included.

Include Visuals

To help make the information in an SOW as clear as possible, it can be useful to use visuals to increase the speed of comprehension– for example, relevant flowcharts and diagrams can communicate a massive amount of information on just a fraction of a page.

Be Considerate of the Potential for Misinterpretation

Finally, it's important to be thoughtful when writing or reviewing a statement of work about the potential for misinterpretation. Are any elements of the project left up to interpretation rather than written out in easy-to-understand language? If so, you'll want to address this before signing and proceeding with the project.

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