Wednesday I had lunch with Mike Morris, Senior Vice President of Software Development at TopCoder. That's his picture at the left. He had an interesting story to tell. I was vaguely familiar with TopCoder through their programming contests. I was never interested enough to sign up for their site, and had no idea what kind of business model they had. Mike filled me in. He and the other founders of TopCoder had be I was vaguely familiar with TopCoder through their programming contests. I was never interested enough to sign up for their site, and had no idea what kind of business model they had.Mike filled me in. He and the other founders of TopCoder had been at Tallán, a custom software development and consulting company. Tallán grew to something over 600 developers, was acquired by CMGI in CMGI’s brief heyday, and then spun off again.“At Tallán, the quality started to deteriorate as we grew,” said Morris. “When we founded TopCoder, we want to figure out a way to build a software factory that would scale.” What they came up with was a community of coders built around programming competitions. Initially, TopCoder supplied the prizes: eventually, sponsors and patrons supported that part of the endeavor.That’s only half the model, though. The other half is that they use the competitions to build components and applications for clients, and to screen developers for employers. What clients and employers? Morris mentioned a few, and the site lists many more: Caliper, Direct Energy, ABB, the Salk Institute, Stage Stores, AOL, Borders, Burlington Coat Factory, IMS, VeriSign, BT, Lilly, and the NSA.That’s right, No Such Agency. I could imagine why the signal intelligence arm of the NSA would be interested in TopCoder, and I was right. “They do a great job of recruiting,” said Morris. “They’re restricted to U.S. citizens, but they recruit many of our best coders.” The methodology used for development at TopCoder is quite rigorous, but too complicated to cover here. Morris explains it in a series of movies online.The TopCoder business model isn’t outsourcing: it’s built on global competition, and controlled by metrics and peer review. It’s also market-driven. “I can tell from the metrics we have on each coder what the probability is that a component will be completed successfully by the entrants,” said Morris. “If the probability is too low, we up the ante to attract better developers. There can be a factor of 20 difference in productivity between a mediocre coder and a top coder, but you don’t have to pay the top coders twenty times as much.”TopCoder will be hosting an in-person competition among 120 finalists at the Mirage in Las Vegas next week, the TopCoder Open. There’s $260,000 in prize money at stake. Software Development