Case Analysis of the article TopCoder (A); Developing Software through Crowdsourcing

In the article TopCoder (A); Developing Software through Crowdsourcing, Lakhani,

Garvin, and Lonstein write about the company TopCoder and describe how the company
functions using crowd sources to meet the needs of creating software programs. Instead of the
company housing a software or IT department to develop programs for clients, the company
creates opportunities for programmers to create custom programs through the means of a contest.
This paper will summarize the article, analyze the core business assumptions of TopCoders
business model as well as the assumptions of its CEO, and discuss potential concerns of the
clients that use the company to create programs. Finally, this paper will discuss potential benefits
and disadvantages of running an IT business using TopCoders business model.

Summary of the article

The article describes how the software solutions company creates custom software
modules for clients. The company is unique in that they create these modules by crowdsourcing
programmers which allows the company to function without TopCoder employees writing one
line of code. Operations of creating these programs is maintained using the global community of
programmers who compete for prizes to create customized modules for clients using more than
225,000 programmers. The article breaks down how the community is used and how the
programmers create programs for their clients. The article supplies the reader with company
feedback from past clients and provides feedback for programmers as well.

The Companys Perspective

The companys CEO Jack Hughes envisioned a company that created high-quality
software solution without the hassle of recruiting programmers and controlling high levels of
employee turnover. Hughes also wanted to save clients time and money and maximize billable
hours by reusing computer programs basic components instead of building applications from
scratch. Building from his experience from Tallan, Hughes created a two-sided platform which
allow clients to pick and choose software components while outsourced programmers competed
in contest to create software solutions. The companys business model is to identify top coders
and use their skills to develop custom software through a combination of traditional IT
consulting services and competitions to solve programming issues for their clients.
CEOs Perspective
The CEOs perspective of how the company functions is unique. Because the company
uses high skilled programmers, there is little concern about evolving technologies or
programmers skill set becoming nonessential. Because the company can supply the programmer
community with a steady flow of contests and opportunities to develop their skills, the CEO is
confident in the companys unique business strategy. There are several indicators that suggest
drawbacks with this assumption. According to the article, typical community member are
described as being competitive driven individuals with flexible work hours and no outside
attachments. According to the data, although the overall size of the online community is quite
large, less than 27.5 % of the community members actually compete or contribute to the
community itself. Out of the 27.5% of members that enact with the community, only 0.5 %
actually win contests.
Another drawback to the supply of programmers is the potential of an imitator. Community
members differ on their level of loyalty to TopCoder. Most programmers agree that they have a
certain level of loyalty to TopCoder because of the opportunities offered by the company. Other
programmers feel that even though it would take a lot for them to leave the company, they would
only leave if the company slowed down on their offerings of projects or if the payment and
workload outweighed that of TopCoder. The largest draw for programmers is the recognition

Case Analysis of the article TopCoder (A); Developing Software through Crowdsourcing
they receive for being winners of contest as well as the feedback received after they have entered
a competition.

The Clients Perspective

The clients of TopCoder come to the company with the expectation of receiving a high quality
software developed that is both cost and time effective fashion. According to past clients, avoiding the
process of software development, recruitment of programmers, and dealing with missed deadlines and
large cost overages was the greatest draw of TopCoder. From the perspective of the consumer, there are
several advantages and disadvantages to using TopCoder.

Pro to Using TopCoder

Creative Think tanks- Clients can run theorized contests that provide the kind of feedback that
can help identify acute ideas and generate better tactics in early development.
Exceptional Quality- TopCoder was praised for their evaluation and documentation process for
being well above industry standards.
Cost effectiveness - Past clients note the difference in cost to their businesses if they were to use
consulting firms or individual contractors to do the same work as TopCoder. TopCoder was
noted as being about half the cost of larger tier IT consulting firms.
Speed- TopCoder was compared to other IT firms and many clients observed that TopCoder
provided the same or faster services for the speed of completion. One client noted that TopCoder
took 72 hours bug testing verses a traditional development firm that took 10 business day to
complete the same task.
Flexibility-Clients noticed the flexibility of TopCoders software development ability. Clients
could expand or condense business requirements without having to deal with changing the
programmers.

Cons to using TopCoder

Security Concerns- Newer clients are often concerned with security and community members
disclosing sensitive information like business plans, ideas, or operations to competitors. They
also worry about ownership of the components used to create their software and intellectual
property disputes.
Cultural changes- When clients use TopCoder and they have existing programmers and software
teams internally, many programmers will feel pressure or a threat to job security. TopCoder and
the clients have to keep close taps on the level of service needed by the client and TopCoder
managers determines the level needed.
Coding Challenge TopCoder has to work hand in hand with the existing internal staff to
integrate the software into the current system, review the code for security issues, and fix code as
systems change. Clients also have to have the ability to find the right type of problems and
provide the right amount of problem detail to the community. Clients would offer too little or too
much detail about issues often found that either community members avoided their projects or
struggled to produce acceptable solutions. Clients also had to play with project deadlines because
if projects were estimated to last longer than two weeks, contestants would lose interest and
would not submit entries.

The Business Model

TopCoders business model demands the steady flow of active community members and
active feedback and participation in the forums. The primary attraction of the company to new
community members is the use of algorithm challenges. The major appeal of TopCoder to
potential programmers for the community is the companys reputation with their rating system.

Case Analysis of the article TopCoder (A); Developing Software through Crowdsourcing
According to a community member, a TopCoder rating could be vital to a programmers career.
Often prominent software firms ask potential recruits to procure a TopCoder rating before
applying for a job.
Another challenge to the business model is the ability to maintaining community resources as
well as control contest creation and participation. In order to achieve the ideal number of
participants and submissions, TopCoder managers adjust prize amounts, duration/timing of the
contest, the number of other contests running simultaneously, and limit the problems complexity
and scope. TopCoder also considers the reliability of the contests when decided on the ideal
number of competitors. Like other consulting firms, TopCoder in a crunch, will reach out
directly to individual community members as a last resort. Their unique business model allows
their clients to control production as well as productivity through a concept called TopCoder
Direct. TopCoder Direst is a self-service model that allows clients to use the platform with no
intervention from TopCoder employees. The concept allows managers to educate clients on how
to use the platform to manage contest-based software development process themselves.
Future challenges to the companys business model include competitors changing strategies,
issues of expanding the company, and the use of community members. Competitors are changing
their strategies by using crowdsourcing to find bugs and offer services that allow them to act like
online liaisons between clients and freelance software developers. In this scenario, the
competitor uses one or more programmers to solve the clients concerns. Without direct
competition, the company has a strategic advantage but how long will this advantage last? With
no current competition, the company has consider what issue it might face with expansion. Issues
with expansion focus on client service. If the company expands too rapidly, the staff might have
to face problems with responding to clients questions and apprehensions. For large clients, the
company might have to increase the number of platform managers which is in direct opposition
of their business model. Other problems with expansion include the use of the programmer
community. Some feel that if the company increases the prizes offered per contest, the company
could grow the community but caution stakeholders about increasing the number of contest
offered during the week. If more contest are offered than in a usual week, software quality could
decrease due to the usual reviewers abandoning their post and signing up for contest. Also due to
the increase of the groups of competitors, attracting the same caliber of competitors would prove
to be a challenge which could affect consistency and continuity.

Conclusion
This paper summarized the article, analyzed the core business assumptions of
TopCoders CEO, and discussed potential concerns of the clients that use the company to create
programs. Finally, this paper will discuss potential benefits and disadvantages of running an IT
business using TopCoders business model. Because of TopCoders unique business model, the
company had to create a community of programmers that worked intimately with its platform
managers to create customized software for its clients. The managers also have to work closely
with the clients to evaluate the needs and perspectives to create competitions for the
programmers in order to complete the finished product. TopCoder represents a balancing act

Case Analysis of the article TopCoder (A); Developing Software through Crowdsourcing
between the consumer, the supplier, and the wholesaler. Without one of the players playing the
appropriate part, the system would not work effectively.