Investment firm Baird has conducted a comprehensive study on the compensation and incentive structures within the cloud computing software sector. It found an increasing trend of incorporating revenue-related key performance indicators (KPIs) into management incentives, with a growing emphasis on profitability and cash flow in recent years.
The study analyzed companies such as Akamai (AKAM), Confluent (CFLT), Datadog (DDOG), Dynatrace (DT), Fastly (FSLY), Informatica (INFA), MongoDB (MDB), Snowflake (SNOW), Bandwidth (BAND), DocuSign (DOCU), Amdocs (DOX), 8x8 (EGHT), Five9 (FIVN), RingCentral (RNG), Twilio (TWLO), Zoom Video Communications (ZM), Apple (AAPL, Financial), and Axon Enterprise (AXON). Many of these companies have implemented both short-term and long-term incentive measures.
Notably, Snowflake stands out for tying its short-term incentives entirely to revenue, marking a leading stance in the industry. Other companies with a significant revenue weight include Confluent (75%), Fastly (67%), Five9 (75%), and Zoom (80%). Akamai, RingCentral, and Apple hold a 50% revenue weight.
MongoDB is unique in focusing all its long-term incentive KPIs on revenue, whereas Apple and Five9 emphasize total shareholder return. 8x8's long-term incentives are entirely centered around market capitalization and stock price.
