One of the biggest problems that appear during development of a piece of software is getting the requirements right. If you do a mistake at this early stage you will have big problems down the road. I found a site where you can develop prototypes and creating requirements whilst getting feedback from your customers and engaging them in the business requirements development process. The best thing on the site is that it allows the stakeholder to create the requirements himself if he chooses to. You should really take your time and take a look at the videos on that site. It is amazing how easy it seems to develop full working prototypes and in the same creating a full business requirements document (use cases and nonfunctional requirements included). I do not know how the guys from Simunication dit it but I really like their product. Most probably if I would have to manage a software project again I would pay the 129$ per month which is their most expensive plan.
Another problem that needs to be taken care of during development is creating and maintaining the project plan. The best web based project management software that I found is www.devshop.com . I really like the way you can control the software development using this site. Again take your time and watch the screencasts. I am not sure if there is a non manual way to transfer the requirements from Simunication to Devshop but I think this would be a minor annoyance anyway. The Devshop guys charge 24$ per month per user which is ok if you are going to create accounts for your project managers and team leaders only.
Add to this a secure subversion hosting service for 10-20$ per month and Skype based communication for every member of your team, and I am pretty sure the location of your programmers does not matter anymore.
PS The post above is not a payed post 
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