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Gaming the System

How a small outsourcing firm uses competition to unite its global community.

MiG-29 is on fire: three consecutive wins for nearly 1,700 points have moved the Russian into fourth place, and he’s gaining on two Americans, duner and aubergineanode, who don’t seem to have much fight left in them. But MiG-29 remains nearly 300 points shy of the top spot, held by nhzp339, the four-event Chinese ace who has never finished out of the money.

Welcome to the Matrix, corporate edition, where to survive and thrive you must stay plugged in. Success in this world is measured in two vernaculars, those of sport and of business. You can almost smell the testosterone (or at least the Red Bull) as young men from around the world compete fiercely for global bragging rights and serious cash. How much? A star can make six figures, and the top player in 2008 will likely clear $500,000.

But this is no Web-based role-playing game or virtual time-killer. What makes this perpetual series of contests noteworthy to CFOs is that these players are competing to build core business applications for Corporate America.

Module Behavior

Software development is not usually positioned as a competitive sport, but there is very little that’s usual about TopCoder Inc., the Glastonbury, Connecticut-based firm that has pioneered this novel approach to outsourcing. Rather than create software, the company has nurtured a global community of independent designers and coders who compete against each other to write small software modules that are ultimately assembled into large programs. By reaching out to MiG-29, nhzp339, and 130,000 others like them, TopCoder has come up with an ingenious solution to a problem that plagues software vendors and corporate IT departments alike: how to maximize the efficiency of an army of highly paid experts.

It’s the sort of capacity-utilization dilemma that most managers can appreciate. Do you staff up for peak workloads and risk idleness, or go lean and risk missed opportunities? TopCoder decided to go in a completely different direction. When it lands a corporate client, its employees serve as architects and project managers, developing high-level specifications for an application and determining how to build it from a series of modules.

Typically, about half of those modules will already exist in TopCoder’s software library. It’s in developing the other half that things get interesting. The company launches a contest around each module, posting the start and end dates and all other relevant information on its Website. At the appointed hour, any and all programmers interested in competing in that particular contest plunge in, each giving it his (and it’s almost invariably his — there are very few females in the community) best shot. Each entry is reviewed by a panel of three judges (who are also community members). The winner and the second-place finisher collect cash and points, the rest lick their wounds and try again next time.

The result, says TopCoder, is rapid delivery of software that is less costly and of higher quality. No need for clients to fear that a boutique consultancy is letting the meter run: the company claims that it can produce applications in 100 fewer days than industry norms, at half the cost and at least twice the quality (based on the “constructive cost model,” aka COCOMO, a common software-development benchmark).

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