Who needs employees?

Jack Hughes founded his company on an unusual business model that is uniquely satisfying the needs of software developers and their clients. Stuart Crainer and Julian Birkinshaw say there are some important lessons in business as unusual.
The Mirage, Las Vegas, has played host to more than its fair share of amazing and outlandish events. It is home to Siegfried and Roy’s collection of live tigers, its own volcano, dolphins, and The Beatles Revolution Lounge, among other things. It is also home to a unique event, the TopCoder Open, in which 120 of the world’s leading software programmers compete for a share of $260,000 in prize money. The assembled software developers match skills in a variety of competitions, including an algorithm competition and those for software design and development.

For TopCoder, this event is another high-profile stage in the development of its unique business model. “The power of competition drives development to new levels, and the TopCoder Open is an exciting event in which the top competitors from our community of more than 140,000 software developers unite to challenge themselves and each other in, arguably, the most prestigious gathering of high-tech talent ever assembled,” said Rob Hughes, president and COO of TopCoder. “This is a great way to bring our community together live and in person, regardless of where in the world they live, to compete in the highest level of competition, learn from the best minds in the business and interact with other members from among their unequalled level of talent.”

Paul Glen, an IT consultant and author of Leading Geeks: How to Manage and Lead People Who Deliver Technology (Jossey-Bass, 2003), observes: “It’s an entertainment ethos that’s taken over a small area of the programming world.” Behind the glamour, TopCoder’s business model is basically to run competitions to solve software problems. Companies pay TopCoder to have its community of software experts solve problems for them. As a result, developers in Minnesota may be competing with fellow developers in China, London or Tokyo. On some occasions, dispersed developers may work as teams on certain competitions.

TopCoder was the brainchild of Jack Hughes, who started the company in November 2000. Hughes’ premise was that talent and skill are the determinant factors in the quality and utility of software – and software has become central to the global economy. TopCoder’s mission is to create objective ratings that place high value on the programming industry’s best and brightest and build opportunity and community for programmers through programming tournaments and employer connections. The competition model is plainly paying dividends for the company; revenues were $14 million in 2006 and have multiplied since. TopCoder now has 120 employees at its Connecticut headquarters.

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