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Geek Gods A new way to hire the best software coders in the world.
By Julie Sloane

(FORTUNE Small Business) – Eleven years of practice and training have brought "Tomek" to this final match. He's spent the past hour in seclusion, meditating to achieve mental focus, then stretching and hopping to warm up. As the judges call his name, Tomek smiles, flashes peace signs to the spectators, and sits at a computer keyboard. "You may begin," says an announcer. Spectators huddle around a monitor, which issues the final challenge to Tomek and three other finalists: "Create a class Nestable that contains a method maxCount that is given the positive integer values a, p, and n." The crowd murmurs appreciation, and all four begin typing.

Tomek, 23, is a Polish student (real name: Tomasz Czajka), and he's someone many entrepreneurs would like to hire. Going into today's match, he's already considered one of the best software programmers, or coders, in the world. Of course, his particular skill is difficult for nontech people to assess. But now a startup called TopCoder aims to fix that. Through contests like the one in which Tomek recently competed at the Mohegan Sun casino in Uncasville, Conn., TopCoder identifies the best programmers, then makes them available to companies that want to employ them.

Based in Glastonbury, Conn., TopCoder is the brainchild of Jack Hughes, who got the idea from a previous family business. In the late 1980s Hughes took over his father's company, called Tallan, which built big software systems for companies such as Barnes & Noble, Best Buy, and Priceline.com. Hughes, 42, understands technology pretty well, yet 20% of the programmers he hired at Tallan simply weren't good enough. "Finding them is very difficult, even now," he says. "There's no good way." (Shed no tears for Hughes, though. He and his family sold Tallan to CMGI, then an Internet incubator, right at the Nasdaq peak for $920 million, half in cash.)

"Getting value out of IT has been the Holy Grail," says Jim Johnson, chairman of the Standish Group, a West Yarmouth, Mass., consulting firm. Johnson says only 38% of small-business IT projects in the U.S. come in working correctly, on time, and on budget. About 15% of IT projects are complete write-offs.

One COO at a health and fitness startup in Manhattan (who asked not to be named) needed a database built but didn't have much money to spend. She asked around and eventually hired programmers in Costa Rica, who came with referrals. They agreed on a price--$8,000 for two weeks of coding--but seven months later she still didn't have a database that worked. (Eventually she had to write $1,000 bonus checks for each programmer to get them to finish.) For her next project she splurged on a $125-an-hour firm in the U.S., but the results were no better. "I'm a businessperson," she says. "I don't have an in-house tech team. I feel like I don't have anyone on my side from a technology perspective."

TopCoder hopes to fill that need. So far the majority of its $1 million in annual revenue has come from running contests sponsored by companies such as Intel and Microsoft, and rating coders (36,000 around the world, half students and half professionals, all ranked by ability). Now it's trying to capitalize by letting companies post job offerings to those coders. So far about 20 companies, including ten small businesses, have done so, paying as much as $10,000 for a three-month posting on the TopCoder website. (Smaller firms can sometimes negotiate a lower price.)

Michael Lewis, CEO of Cryptic Studios, a videogame developer in San Jose, paid TopCoder $3,000 to post a position in October 2002, and hired two programmers. "It's critical that we don't waste a lot of time sorting through people," Lewis says. "Every month matters. We're looking for people able to work independently and solve tricky problems quickly. TopCoder seems to be a good screen for that. The two we hired through them have worked out amazingly."

The fee TopCoder charges might seem steep, especially because you merely get the right to post an offering, with no guarantee you'll find someone. But it's not outrageous compared with the fees a technical recruiter demands (15% to 20% of the employee's first-year salary). If you're hiring two or three coders, a recruiter can quickly get expensive.

Back at the casino, tomek advances to the finals, where the stakes become officially nerve-racking. First place is $50,000, enough to buy a nice apartment in his native Warsaw. When the first problem pops up, the crowd, which is knowledgeable, gasps. "I worked on it for an hour and a half, and I didn't get it," says a TopCoder employee. Tomek completes it in ten minutes and starts on No. 2. Half an hour later, two other finalists, "bstanescu" and "TJQ," are floundering. (The coders go by their online handles.) A third, "Yarin," struggles early and then rallies. It's anybody's game.

As the results are posted, the crowd grows silent. All four solved the first question correctly. Second question--only Yarin and Tomek got it right. Third question--only Tomek. He wins.

Tomek whoops and jumps up and down, then gets a giant check with his name on it. Yarin shrugs and smiles. "I knew I would need a very good day to beat Tomek," he says. He still gets $15,000 for second place.

"What was going through your mind?" a TopCoder employee asks third-place bstanescu. He shrugs.

"Ones and zeros."