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Microsoft Just Took an Unprecedented Step for Some Employees

Danny Vena, The Motley Fool

The growing and lucrative markets of cloud computing and artificial intelligence (AI) has attracted the interest of some of the top companies in tech. Amazon (NASDAQ: AMZN) pioneered cloud computing in 2006, and AI has been percolating for some time with technology stalwarts Microsoft (NASDAQ: MSFT) and Google, a division of Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG), joining Amazon in the fray.

This cutthroat competition in both these fields has led to a wave of poaching as employees move from one tech company to another. In jobs where annual salaries can top hundreds of thousands of dollars, Microsoft took the unprecedented step of paying six-figure bonuses to keep some of its most valuable talent from defecting.

Businessman pulling pile of $100 bills off a table.

Image source: Getty Images.

Show me the money

Microsoft recently handed out stock bonuses, with some valued at more than $100,000, to its engineers to keep them from being poached by competitors. Those incentives were said to be as high as 1,000 shares of Microsoft stock, which is currently trading above $107 per share, making the value of the bonuses worth as much as $107,000 -- and potentially more over time. These awards vest progressively, enticing employees to stay longer -- the longer they stay, the more they earn. Historically, Microsoft's annual bonuses have vested over a five-year period, with employees earning equal amounts each year.

The company was mum as to the reason for the awards, but some believe they were meant to keep the employees from defecting to competitors. Hiring bonuses for the most highly qualified personnel can climb to six figures, so this move was seen as pre-emptive to keep employees from cashing in on a new position at another company.

The most obvious culprit is Amazon, who is said to have poached the highest number of key staff from Microsoft in recent years. The e-commerce giant has hired away at least 30 executives at the director level or higher from Microsoft between 2015 and 2017, according to wage analysis conducted by start-up Paysa, and as reported by CNBC. 

The close proximity of the businesses may be one contributing factor, as Microsoft's Redmond, Washington, headquarters is located just 14 miles from Amazon's digs in Seattle. Microsoft isn't the only company affected by Amazon's hiring spree. At least five executives from Google were lured away over the same three-year period, though its headquarters in Mountain View, California -- more than 800 miles away -- isn't nearly as convenient a poaching ground.

The stakes are high

While estimates vary, both cloud computing and AI are creating massive markets. AI is expected to increase at a compound annual growth rate (CAGR) of 37% and eclipse $191 billion by 2024, according to research by Market Research Engine. 

The cloud computing market is made up of a number of segments, including software as a service (SaaS), platform as a service (PaaS), and infrastructure as a service (IaaS). This combination of cloud services is also expected to see significant gains, growing at a CAGR of 24% annually, topping $411 billion, according to a joint research by CenturyLink and Statista. 

With that much at stake, companies are lining up to get their share -- and the poaching is likely to continue.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Danny Vena owns shares of Alphabet (A shares) and Amazon. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Amazon. The Motley Fool has a disclosure policy.