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Why noncompete clauses hurt cloud competition

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The Big Story

Let the people go

It's hard to imagine Silicon Valley evolving the way it has over the past 25 years if noncompete clauses were legal in California. But 800 miles to the north, their selective enforcement continues to hold back the most vibrant cloud-computing region on the planet.

Late last month, AWS invoked its HR Sword of Damocles and filed a lawsuit against Brian Hall, a vice president of marketing at the Seattle-based cloud leader who left the company to take a similar job with Google Cloud. AWS alleges that Hall should be prohibited from joining Google because he "helped develop and knows the entire confidential Amazon cloud product roadmap for 2020-21," according to the complaint. (Brian, my DMs are open.)

  • Hall's case once again highlights how randomly AWS enforces the noncompete clauses in its contracts.
  • When Ariel Kelman, who was Hall's boss at AWS, left AWS for a similar position at Oracle earlier this year, he was free to go, apparently because he lives in California.
  • According to Hall's response to the lawsuit, Kelman told Hall that AWS almost never enforces noncompete clauses against marketing executives.

AWS is well within its rights to include standard noncompete clauses in its employment contracts under Washington law, but the way it enforces those clauses creates a chilling effect in the back of every AWS employee's mind — and a red flag for those thinking about joining the company.

  • Amazon doesn't have to sue every time to have an impact on employees who are thinking of leaving. It's the employment version of going through the security line at the airport (remember that?) and getting selected for a "random" screening; even though the TSA can't search everybody, the prospect of sometimes being searched is enough of a deterrent.
  • But does AWS really want to deter people from joining its ranks? Brad Fitzpatrick, a well-known and accomplished cloud engineer who lives in Seattle, recently interviewed with AWS and was put off by the insistence on a noncompete provision.
  • The tension created by the selective enforcement of these clauses appears intentional, and could force some AWS employees to stay in roles that prevent them from improving their career prospects.
  • Washington rolled out some changes to the noncompete laws at the beginning of 2020 that restrict their use against employees making less than $100,000, but that's a starting salary out of college in the cloud world.

There are plenty of compelling reasons to work for AWS, an industry leader that has attracted some of the best talent in tech. Yet the long game here seems unsustainable, especially for a company that's such a big potential antitrust target.

  • Silicon Valley's freewheeling culture has always been something of a flywheel for tech talent: You can learn the ropes at a big company, found or join a startup, put that big company on the defensive with a better product or service, and cash in while moving the industry forward.
  • Microsoft also includes noncompete clauses for employees who work on the other side of Lake Washington in Redmond, but it doesn't seem to enforce them as selectively as AWS.
  • Employees don't always leave jobs to make more money or to funnel trade secrets to competitors: Sometimes they leave because their manager is a tyrant, and sometimes their personal circumstances just change. Those employees are not going to be more productive in their current roles if they're worried about having to retain a lawyer in order to improve their lives.

If Washington state really wants to be seen as a tech hub on par with Silicon Valley, it would be smart to take a closer look at how these noncompete clauses are affecting competition. Technology — especially cloud technology — can change so much within the 18-month noncompetition period specified in many of these clauses, and forcing people to sit on the sidelines for that long can have outsized effects on their career.

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Five Questions For...

Rackspace Technology CEO Kevin Jones

What's the best piece of advice you could give to someone starting their first tech job?

I have two pieces of advice. The first is: It's not about what you can learn during your first 100 days – it's quickly executing a "first 100 hours" plan to immerse yourself in the company and the culture. It's also important to consider: If you have a ten-year strategic plan, you should ask yourself, "why can't I accomplish this in six months?"

Mac or PC?

I'm a PC guy when it comes to my work computer. I have an affinity towards PCs from my time working at HP and Dell. However, we have several Macs at home, as well.

iPhone or Android?

While I love both Android and Google, I'm pretty inseparable from my iPhone.

What will be the biggest challenge for cloud computing over the coming decade?

Now, more than ever, IT professionals should focus on cost savings, the ability to scale up or down, security, and agility to stay on pace with the shifting market. Uncertainty in the global economy is obviously a challenge, but the pandemic is actually accelerating customers' journey to the cloud.

Will the pandemic usher in a new era of remote working, or will we all come back together when it is safe to do so?

Currently, we have more than 99.5% of (employees) around the world working from home, and we will not return to our offices until I feel 100% confident it's safe to do so. Whether or not the future of work is remote, the pandemic has accelerated the pace of innovation and has many businesses fast-tracking IT modernization plans. This will have the most significant impact on the future of the cloud for years to come.

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