The handheld project is the latest in a series that TopCoder has done for Stage in recent years, Kish said. For instance, the firm has built applications to handle the online sale of gift cards and to manage product returns.

"You can look at the competitions week after week and see how the developers are scoring," Kish said. "If you offshore something, you may understand the project manager, but you have no way of understanding the quality of the resources below that level."

Meanwhile, Kish is considering whether to launch internal competitions for Stage's development staff to help identify areas where employees need additional training.

Shawn Willett, an analyst at Current Analysis Inc. in Sterling, Va, said TopCoder's "virtual sourcing" model could be viable for companies that don't have the scale to justify offshoring development.

TopCoder's contract developers are also building a content management system for a Mobile Companion project under way at sports broadcaster ESPN. The system will send viewers information about events as they are broadcast by the network, said John Zehr, vice president of development at ESPN.