ThoughtSpot-Qlik battle shines a light on non-compete contracts
ThoughtSpot and Qlik CEOs squabble online over controversial but widely used non-compete agreements and the larger impact these contracts have on the IT industry.
The CEOs of two leading business analytics vendors erupted in a highly charged online argument over the use of controversial non-compete contracts -- something many technology companies require their employees to sign but aren't always enforceable.
ThoughtSpot's CEO alleged that one of ThoughtSpot's employees was forced to leave the company because of a non-compete contract they signed with their previous employer, Qlik, which reportedly threatened to enforce the contract. The non-compete agreement prohibits Qlik employees from joining any other company in "a similar space" for 12 months after they leave Qlik.
The two vendors, and others in the super-competitive and fast-consolidating analytics and business intelligence market, are in a fierce battle for developer and executive talent. Non-compete contracts remain controversial but are not unusual in the software industry. Critics say they are unfair and unenforceable, but some companies still rely on them to retain talent in the face of poaching by competitors and to protect against loss of intellectual property.
Another key argument against non-compete contracts is that they stifle innovation. But some companies, even startups, continue to rely on them out of fear that employees could leave and start competing companies with the knowledge and training they received at their previous employer.
In ThoughtSpot's case, CEO Sudheesh Nair saw the non-compete concept as a threat to his company's own prospects.
Soon after ThoughtSpot's annual user conference ended Oct. 17, the fast-growing Palo Alto startup's CEO posted a 925-word diatribe on LinkedIn saying one of ThoughtSpot's most promising employees resigned because arch competitor Qlik threatened enforcement of a strict one-year non-compete contract the employee had signed.
"Instead of looking within to how to retain their talent, [Qlik] pulled a move just as old school as their technology. They started punishing their former employees in brutal fashion," Nair said in the Oct. 22 post.
Qlik CEO Mike Capone, hired in 2018 after the vendor was bought by equity firm Thoma Bravo and taken private, fired back the same day in a post on Qlik's website.
"ThoughtSpot has been methodically trying to poach Qlik employees for several years now," Capone wrote. "Qlik has never prevented employees from leaving the company, that of course happens in business."
In a prepared statement, Qlik acknowledged its reliance on non-compete contracts.
"Like many software companies, Qlik asks its employees to sign non-compete agreements to protect IP and confidential information," the statement said. "We enforce non-compete clauses when warranted to protect our assets, especially when it is clear that our IP and confidential information are being targeted by a competitor or misused by a former employee."
Non-compete clauses difficult to enforce
The CEOs' public squabble has brought attention to non-compete contracts. Non-compete contracts are far from definitive, and enforceability often depends on whether a judge deems the agreements reasonable. In New York, for example, a non-compete contract is considered reasonable when it meets three criteria: it's necessary to protect the employer's interests, it doesn't harm the public and is not unduly burdensome to the employee. Other states define reasonable differently, and with varied restrictions, according to legal publications.
Meanwhile, former Qlik employee and analyst Donald Farmer posted his own broadside against non-compete contracts. In an interview, Farmer said he didn't know the particulars of this situation, but that as a Qlik vice president from 2011 to 2016, he signed a non-compete contract.
Farmer argued that such agreements are difficult to enforce because proving malicious intent or theft of intellectual property or other information is lengthy and complicated. Employers instead rely on the threat implicit in non-compete language.
Also, unlike a specific complaint or lawsuit against a former employee, non-compete contracts don't require an employer to produce evidence, Farmer noted.
Non-competes are a restriction on an individual's ability to pursue their career. They're rarely enforced, but they're used to intimidate existing employees to not leave.
Donald FarmerPrincipal, TreeHive Strategy
"Non-competes are a restriction on an individual's ability to pursue their career. This means you can't go and work for another BI company," said Farmer, principal of TreeHive Strategy in Seattle. "They're rarely enforced, but they're used to intimidate existing employees to not leave."
Farmer added that he found the public exchange between the CEOs "extraordinarily petty" on both sides, but noted that a backstory informs the developments.
Farmer called ThoughtSpot the "new kid on the block that is sucking up all the oxygen" by working hard to hire talent away not only from Qlik but also other analytics and BI vendors. However, he also maintained that non-compete agreements are "cruel" and in his view, punish employees for leaving a company.
Qlik upheaval
At the same time, Qlik, based in Radnor, Pa., is coming off rounds of restructuring and layoffs since it was acquired by Thoma Bravo, all amid a bruising battle with Tableau, Qlik's biggest direct competitor. The holding company has since invested in Qlik with a new management team led by Capone and several major acquisitions, but all that upheaval has affected Qlik employees and management, Farmer said.
The exchange of rhetoric on LinkedIn spawned a string of nearly 200 comments on the professional social network platform. Some are from Qlik employees professing their loyalty to the company, while others are from former employees who said they also signed non-compete contracts.
