The siren song of overseas outsourcing draws in its victims by promising amazing apps at extremely low costs.

"Save big money! Reduce workforce hassles! Watch custom apps magically appear before your eyes!"

Can outsourcing application development save money and produce the results you need? Definitely. But first, you must understand how some vendors hide expenses that could cost you big time if you aren't careful.

Here are five tips from the trenches on how you can eliminate the hidden costs of outsourcing up front.

1. Beware of the fixed-price model.

A fixed price sounds very attractive because it puts you at ease by reducing budgetary uncertainty. Unfortunately, many overseas outsourcing firms lure you into a deal and hit you with additional charges later. The vendor will quote an incredibly low price to build an app, however, the statement of work will not include all the needed features. Months later, the money will be gone, and the app will be far from market-ready.

A new client came into my office with a budget emergency. Their original vendor had already charged them 120% of the original fixed-price budget, yet the project was only half complete. In this situation, as the client, you are stuck. Do you invest more cash to get the app finished? Or do you bail out and start over with another vendor, who will be just as expensive?

How do you avoid this disaster? Understand that in the world of high-quality application development, fixed-price is impossible. Instead, choose a vendor that invests serious time up-front to understand how your app needs to work as part of creating a detailed, good-faith cost estimate.

2. Important features go first.

At the outset of the project, the vendor needs to determine how the app should work at the end. It sounds simple, but not many outsourced firms follow this process. Choose a vendor that relies on Agile, a methodology used to describe--in non-technical terms--everything the app needs to accomplish. Based on this vision, they will prioritize which features are most important to the end-user, and the most critical features are developed first. If you run into budget or timeframe issues, you are able to cut off development and still have a working product--just without the least-important items on your wish list.

The hardest and highest-priority work should always come first. Avoid vendors that want to tackle the easy parts at the beginning.

3. Get the personnel you were promised.

It's the ultimate bait-and-switch. An outsourced vendor waves around impressive resumes for the developers who will work on your project, but those developers may never actually be chosen for you project. Or, as time goes on, those experienced developers are gradually replaced by greener team members. You end up with kids in college who are working on their first app. Alternatively, perhaps a great Java guy is assigned to your project but he'll have to learn on the job if Java is not what is required.

Turnover can also be a killer. In some countries, turnover rates run as high as 40% during a project. We had a client who came to us right after three key developers on their project quit to go work for a competitive company. This kind of turnover leads to constant retraining and relearning of the technology, your app and your market space, which costs you big money.

How can you avoid these problems? Start by investigating the vendor's turnover rates. Require a guarantee that the people who started the project will see it through, unless you approve a replacement, or a serious illness or death occurs. Get references for the particular technology you require to ensure the team has completed similar projects successfully. Make sure you speak to the actual developers on your project weekly throughout the project's duration. That way, you will know who is really working on your project.

4. Create a communication plan.

Some vendors want to keep you out of the process. They may suggest signing the deal, then reconnecting in six months once the app is complete, but that is a recipe for disaster.

Choose a company with a well-established set of processes that includes daily, weekly and monthly meetings. Require full transparency into the project, including a work schedule and details about which developer is assigned to create which features. The vendor should ask for detailed contact information for you and backup contacts should they need to call, email or text with any questions. Finally, choose a vendor in a realistic time zone. If you wish to speak to the developers that are working on your app,you will run into difficulties if they live 11 hours away.

5. Find a vendor who understands your business.

Anyone can send a rate sheet listing developers at $40 an hour. But what does that really buy?

If you want an app that can change your business for the better, you need to choose a vendor whose employees comprehend your business and what you are trying to accomplish. During the sales process, listen to the vendor and take note of the questions asked. Partner with someone who makes detailed inquiries about your company, your market, your competitors and your objectives.

The harder your vendor works to understand your goals and your bottom line, the better your app will be.

Co-founder of Austin-based Growth Acceleration Partners (GAP), Joyce Durst is driven to help software companies achieve rapid growth through business-focused applications. Joyce has launched startups and led teams at enterprise companies by applying her passion and business knowledge to efficiently create software that solves business problems. Active in the community with Special Olympics and Springboard alumni, she enjoys helping other women in technology to achieve their dreams.

Published on: Nov 13, 2014