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Harvard Case - TopCoder (A): Developing Software through Crowdsourcing

"TopCoder (A): Developing Software through Crowdsourcing" Harvard business case study is written by Karim R. Lakhani, David A. Garvin, Eric Lonstein. It deals with the challenges in the field of General Management. The case study is 20 page(s) long and it was first published on : Jan 15, 2010

At Fern Fort University, we recommend TopCoder adopt a hybrid approach to its business model, leveraging both crowdsourcing and internal development teams. This strategy will allow TopCoder to capitalize on the strengths of both models while mitigating their respective weaknesses. This approach will involve a phased implementation, focusing on building internal capabilities, fostering a collaborative environment, and strategically allocating resources to maximize value creation.

2. Background

TopCoder is a platform that utilizes crowdsourcing to develop software for various clients. They have a large pool of skilled developers who compete in challenges, with the winners receiving rewards and recognition. This model has been successful in attracting talent and delivering innovative solutions, but it also presents challenges in terms of quality control, project management, and intellectual property protection.

The case study focuses on TopCoder's decision to expand its business model by developing an internal development team. This move aims to address some of the shortcomings of the crowdsourcing model and provide a more predictable and reliable service to clients.

Main Protagonists:

  • Jack Hughes: TopCoder's CEO, responsible for strategic direction and decision-making.
  • Mike Morris: TopCoder's COO, responsible for operational efficiency and execution.
  • The TopCoder Development Team: The internal team responsible for developing software for clients.
  • The TopCoder Community: The large pool of skilled developers who participate in challenges.

3. Analysis of the Case Study

This case study presents a classic dilemma for businesses seeking to leverage the power of crowdsourcing while maintaining control and quality. To analyze the situation, we can utilize the following frameworks:

Strategic Framework:

  • SWOT Analysis:
    • Strengths: Large and skilled developer community, innovative solutions, cost-effective model.
    • Weaknesses: Quality control issues, project management challenges, intellectual property concerns.
    • Opportunities: Expanding into new markets, developing internal expertise, providing higher-value services.
    • Threats: Competition from traditional software development companies, potential for talent poaching, changing client demands.
  • Porter's Five Forces:
    • Threat of new entrants: High, due to the ease of entering the software development market.
    • Bargaining power of buyers: Moderate, as clients have various options for software development.
    • Bargaining power of suppliers: Moderate, as TopCoder relies on a large pool of developers.
    • Threat of substitute products: High, as alternative software development models exist.
    • Rivalry among existing competitors: High, due to the fragmented nature of the software development industry.

Financial Framework:

  • Cost-Benefit Analysis: While crowdsourcing can be cost-effective, it can also lead to hidden costs related to quality control, project management, and intellectual property protection.
  • Return on Investment (ROI): The ROI of internal development teams can be higher in the long run, but it requires significant upfront investment.

Marketing Framework:

  • Value Proposition: TopCoder's value proposition needs to be clearly defined and communicated to clients, emphasizing the benefits of both crowdsourcing and internal development.
  • Brand Management: TopCoder's brand needs to be consistent across both models, ensuring a cohesive and trustworthy image.

Operational Framework:

  • Process Optimization: TopCoder needs to optimize its internal development processes to ensure efficiency and quality.
  • Resource Allocation: TopCoder needs to strategically allocate resources between crowdsourcing and internal development.

4. Recommendations

To address the challenges and capitalize on the opportunities presented in the case study, TopCoder should implement the following recommendations:

Phase 1: Building Internal Capabilities:

  • Develop a core internal development team: Focus on hiring experienced and skilled developers with a proven track record in managing complex projects.
  • Invest in training and development: Provide ongoing training programs to enhance the skills and knowledge of internal developers.
  • Establish clear internal processes: Develop standardized procedures for project management, quality control, and intellectual property protection.

Phase 2: Fostering Collaboration:

  • Create a collaborative environment: Encourage communication and knowledge sharing between the internal team and the crowdsourcing community.
  • Develop a hybrid model: Leverage the strengths of both models by utilizing crowdsourcing for specific tasks and internal development for complex projects.
  • Implement a tiered approach: Offer different service packages to clients based on their needs and budget, ranging from pure crowdsourcing to fully managed internal development.

Phase 3: Strategic Resource Allocation:

  • Prioritize projects based on complexity and client requirements: Allocate resources to projects that are best suited for each model.
  • Monitor performance metrics: Track key performance indicators (KPIs) such as project completion time, budget adherence, and client satisfaction.
  • Continuously evaluate and adjust: Regularly assess the effectiveness of the hybrid model and make necessary adjustments based on performance data.

5. Basis of Recommendations

These recommendations are based on the following considerations:

  1. Core competencies and consistency with mission: The hybrid model aligns with TopCoder's mission to provide innovative software development solutions while leveraging its core competency of connecting skilled developers with clients.
  2. External customers and internal clients: The hybrid model caters to the diverse needs of clients, offering flexibility and scalability while ensuring quality and control.
  3. Competitors: The hybrid model differentiates TopCoder from traditional software development companies by offering a unique combination of crowdsourcing and internal expertise.
  4. Attractiveness ' quantitative measures: The hybrid model is expected to increase profitability by optimizing resource allocation and improving project efficiency.

6. Conclusion

By adopting a hybrid approach, TopCoder can leverage the strengths of both crowdsourcing and internal development, creating a more robust and competitive business model. This strategy will allow TopCoder to address the challenges associated with crowdsourcing while capitalizing on its potential for innovation and cost-effectiveness.

7. Discussion

Alternatives not selected:

  • Pure crowdsourcing: This approach would rely solely on the crowdsourcing model, potentially leading to quality control issues and project management challenges.
  • Pure internal development: This approach would require significant upfront investment and could limit TopCoder's ability to access a diverse pool of talent.

Risks and key assumptions:

  • Risk: The hybrid model may be complex to manage and require significant resources.
  • Assumption: TopCoder can successfully build a strong internal development team.
  • Risk: The crowdsourcing community may be resistant to the hybrid model.
  • Assumption: Clients will be receptive to the hybrid model and its value proposition.

8. Next Steps

To implement the recommendations, TopCoder should follow these steps:

  • Phase 1: Develop a detailed implementation plan for building internal capabilities, including hiring, training, and process development.
  • Phase 2: Launch a pilot program to test the hybrid model with select clients.
  • Phase 3: Based on the pilot program results, refine the hybrid model and expand its implementation across all client segments.

This phased approach will allow TopCoder to gradually transition to the hybrid model while mitigating risks and ensuring a smooth implementation process.

Key Milestones:

  • Month 1-3: Develop a detailed implementation plan and hire key personnel for the internal development team.
  • Month 4-6: Launch the pilot program and collect data on its effectiveness.
  • Month 7-9: Analyze pilot program results and refine the hybrid model.
  • Month 10-12: Expand the hybrid model to all client segments.

By following these recommendations and next steps, TopCoder can position itself for continued growth and success in the dynamic software development market.

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Case Description

TopCoder's crowdsourcing-based business model, in which software is developed through online tournaments, is presented. The case highlights how TopCoder has created a unique two-sided innovation platform consisting of a global community of over 225,000 developers who compete to write software modules for its over 40 clients. Provides details of a unique innovation platform where complex software is developed through ongoing online competitions. By outlining the company's evolution, the challenges of building a community and refining a web-based competition platform are illustrated. Experiences and perspectives from TopCoder community members and clients help show what it means to work from within or in cooperation with an online community. In the case, the use of distributed innovation and its potential merits as a corporate problem solving mechanism is discussed. Issues related to TopCoder's scalability, profitability, and growth are also explored.

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