Chapter 4: Software Specifications and Acceptance Testing

Overview

The overwhelming majority of software licenses entered into every day lack two critical elements. First, they contain no detail whatsoever regarding the software's required functionality, interoperability, interface capabilities, etc. Apart from a vague reference to the undefined "documentation," the agreement is generally silent regarding what the software will actually do for the licensee. Second, the software, even applications licensed for millions of dollars, is not subject to any acceptance testing by the licensee. There is no procedure in the agreement permitting the licensee to test and evaluate the software to ensure the software satisfies the licensee's requirements and, worse yet, provides no remedy if the software fails to meet those requirements.

In this chapter we focus on these related issues: software specifications and acceptance testing. Both issues are key to ensuring the licensee actually receives the full value of what it thinks it is buying.

A brief example will illustrate the problem. A healthcare provider attended an industry conference at which it saw a demonstration of a new application being licensed by a well-known vendor. The healthcare provider was particularly interested in the functionality of the software relating to pharmacy management. After paying several hundred thousand dollars in license and implementation fees, the healthcare provider was shocked to discover that the licensor had decided not to include pharmacy functionality in its product. Because the license agreement made no reference to the pharmacy functionality and only required that the software provide the functionality in its documentation, the healthcare provider had no remedy under the agreement.

The following sections of the form license agreement are discussed in this Chapter: Sections 1.4 (Definition of Documentation) and 2.7 (Delivery).