What other options are there? Guaranteed end of year bonuses? Commissions in the form of profit sharing?
In major law firms, the associates aspire to become partners in the firm, which is analogous to my interpretation when saying "equity".
I'm not sure it would work, but if it did, it could be a perfect solution for keeping a great team together for the long haul.
It's a consulting company not a product company; it may be significantly different when "making partner" at a product company. However, from what I've heard, each partner at Accenture essentially runs his or her own business within the larger scale of the organization. Success is directly tied to the success of the internal mini-businesses. It is, however, an example of a company where IT professionals can become equity stakeholders in a private firm.
I imagine a product company would need to make the partners in charge of one product each (or maybe a couple of partners on one product) in order to avoid the "Too many cooks in the kitchen" problem.
Accounting and law firms may be a better example, though even they aren't as entrepreneurial as you think. They have their own regulations and internal politics.
At Andersen, at one point, I heard the number was $10M/yr of revenue.
It would be harder to figure out how much revenue is generated by an individual contributor (even if they are a superb coder).
Also, partnership usually involves leadership decisions
Seems to be largely working within the specific space of Silicon Valley YCombinator-funded startups, but I'm not sure how well it scales. There's a pretty sharp filter for getting into YC, and for someone without access to PG's connections, the chance of hitting it big or getting acqhired may not be worth the risk they take.
I don't want an incentive scheme to help make you money. Pay me 20-25% of the revenue I generate for the company and give me a non-zero chance to be a stakeholder and I'll work my ass of for you.
As for making partner in a BigLaw firm, folks I've talked to describe it as "a longshot" to "nearly impossible." A firm like Skadden will hire 500+ new associates a year (worldwide) and name maybe 4-6 partners, not all of whom started as associates. Unlikely the chance of going from associate to partner breaks 1%.
(Updated #s after asking someone who worked for Skadden.)
As for the chances of making partner, it depends heavily on the firm and the year. Skadden is something of an outlier[1]. The other big NYC firms bring aboard about ~100-120 associates per year, and promote between 5-15 depending on the economy. The last few years it's been around 5 and during the boom it was around 15. At medium-sized firms outside NYC, the %-age is more like 20-35%, though profits-per-partner at those firms are more like $300-500k/year, versus $2m+ at Skadden.
[1] Though your numbers seem grossly exaggerated. Worldwide Skadden brought aboard ~200 this year, which was a big crop. The two years before that were ~100 put together. And over the last few years, the partners promoted counts have been: 2007 (29), 2008 (25), 2009 (8), 2010 (6), 2011 (8).