The R&D Tax Credit Aspects of Automated Coding



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Automated-Coding
        In a February 2015 interview with technology news website Re/code, President Obama asserted that “everybody has got to learn how to code.”  Until very recently, this would be an undisputed affirmative. Fostering programming skills was considered a logical, necessary step in the country’s efforts to lead the world in technological innovation.

        Today, however, emerging technologies question this idea. Code-writing solutions promise to automate the time-consuming, repetitive task of programming and free up skilled labor to focus on more groundbreaking work.

        The present article discusses the latest trends in automated coding innovation as well as the R&D tax credit opportunity available for companies engaged in making the technology world accessible to those with no programming skills.


The Research & Development Tax Credit

Enacted in 1981, the federal Research and Development (R&D) Tax Credit allows a credit of up to 13% of eligible spending for new and improved products and processes. Qualified research must meet the following four criteria:

  • New or improved products, processes, or software
  • Technological in nature
  • Elimination of uncertainty
  • Process of experimentation

        Eligible costs include employee wages, cost of supplies, cost of testing, contract research expenses, and costs associated with developing a patent.

        On December 18, 2014 President Obama signed the bill extending the R&D Tax Credit for the 2014 tax year. As of this writing, proposed tax extender legislation would extend the tax credit through December 31, 2016.


Software is Eating the World

        In a recent Bloomberg Businessweek article, “What is code?” , writer and programmer Paul Ford points to the difficulties in understanding the world of software development. Though ubiquitous and an essential part of our daily lives, coding remains mysterious for most of the population. As the article brilliantly puts, the first thing people must understand is that “there’s no magic, no matter how much it looks like there is. There’s just work to make things look like magic.”  

        Mr. Ford refers to International Data Corporation’s research according to which there are 11 million professional software developers worldwide, plus 7 million hobbyists. This is a direct result of the fact that an increasing number of things are or will be computers, from watches and cameras to toys and airplanes. In this context, the importance of software cannot be understated. In the words of American entrepreneur and software engineer Marc Andreessen, “software is eating the world.”

        By creating reproducible units of digital execution, known as software, programmers successfully use machines to satisfy human needs. Consequently, the exclusive community of those who master machine language seems to have more power than ever. As pointed out by Mr. Ford, “if coders don’t run the world, they run the things that run the world” and this scenario is not changing any time soon.

        In Mr. Ford’s words, “data management is the problem that programming is supposed to solve.” Given that we live in a time of unprecedented data generation, it is safe to say that there is no way around coding. It is and it will continue to be everywhere. The issue, however, is how to make programming more efficient and inclusive.


Code-That-Writes-Code

        Software can make virtually anything more efficient. In the era of automation, we already use software to make business decisions, monitor our health, and even turn on the heat at our homes. Ironically, however, one field seems to lag behind: the business of writing software itself.

        Writing code is a repetitious, time-consuming, and rather inefficient task. In addition to being labor-intensive (it requires a designer and/or project manager as well as a developer to work together), it frequently involves beginning from scratch, even if similar work has already been done in the past.

        Automated coding researcher, Scott Barstow, points out that many programmers get paid $160-$200 per hour to write pretty much the same code. In his words, “(…) many companies paying outside firms or even in-house teams to start from scratch on apps, which have so much overlap. If you pay a ‘dev house’ typically $75,000-$100,000 or more to build an app, I’d say at times 50 per cent of the money is wasted because the same stuff is being written again and again.”

        Aiming to change this scenario, innovative computer scientists are beginning to look at how software can make programming more efficient. This groundbreaking work could eventually transform the role of programmers, making them computer trainers - responsible for “teaching” computers how to write code instead of doing it themselves.

        Experts believe that software writing automation could open the way to a new era of personalized applications in which people tell their devices what they want and it immediately writes the code that fulfills their needs, no programming background necessary. People will create their own solutions to their own problems.


Automated Code-Writing Startups

        The creation of code-writing software is an important step in demystifying the world of technological innovation. According to a recent Financial Times article, the work of pioneering companies promises to empower “both the developer class, who understand the computer language that powers the invisible workings of the modern world, and the vast majority of people who do not.”   

        The following sections present three important features of the work developed by innovative, automated code-writing startups.

I. Natural Language
        The idea is to allow people with no programming knowledge to explore the world of coding. British startup Bloomsbury Ai’s mission summarizes it well - “enabling computers to understand human language so that humans don’t have to understand computer language.” Created in April 2015, the company is currently working on a virtual agent that will allow people with no coding skills to perform complex data analytics in just a few minutes.

II. Necessities and Intents
        Raleigh, North Carolina-based Queue Software is at the forefront of software-writing automation. The company is currently working on a code-writing platform capable of capturing the users’ necessities and intents. The so-called Dropsource utilizes users’ inputs to determine the best design and development approach. Based on this information, it generates commented and editable native source code, allowing users to accelerate development cycles and focus on other tasks.

        Queue Software started as a development house that built applications for a wide variety of clients. Upon realizing that most of its programming efforts were repetitive – building the same thing over and over – the company understood how automation could translate into major efficiency gains and cost reductions. Queue Software estimates it will be able to automate nearly 90 percent of writing code.  

III. Visual Programming    
        New coding experience. York startup, Bubble, is also engaged in enabling people with no coding skills to create their own software. To do so, they developed a visual programming platform for building web and mobile apps. With a drag and drop, cloud-based  interface, Bubble introduces a new layer of abstraction on top of programming technologies, making them completely accessible to people with no prior

        The platform has no predetermined templates, so that each application can be unique. With workflow logic, it offers video tutorials and click-by-click lessons that help users get through the creative process.  

        Though there are no costs for building an application with Bubble, however the company charges to host it once it is up and running and the platform is considered a cost-efficient solution by over 3,500 Bubble users.


Democratizing Innovation

        By helping overcome the dependency on skilled developers, code-writing automation will boost innovation and reduce costs. The current shortage of skilled programmers raises the value of their work and discourages company loyalty. In addition, it holds back innovation making it intrinsically dependent on technical expertise.

        A recent TechCrunch article points out how automatic coding can democratize innovation and accelerate the pace of product development. It is the first step towards a new paradigm in which “anyone with a great idea anywhere in the world can build a billion-dollar tech company.”

        Emmanuel Straschnov, co-founder of Bubble, stated that accessible programming could change the way we do virtually everything. It could enable farmers to create intelligent robots, capable of tending crops based on soil conditions; teachers could use uniquely tailored software to teach each group of students according to their needs; and even chefs could create personalized applications that buy fresh food as orders are placed.

        Simply put, the potential for innovation is limitless. People from various backgrounds become the agents of a technological revolution in which software tools are designed by their users, to fulfill their specific needs. One can only imagine the tremendous economic impact of this new paradigm.


Software Deployment Automation

        Automated code-writing solutions are not the only way to make software production more efficient. Initially released in 2013, Docker has gained increasing attention for making developers lives’ easier. It consists of an open-source project that automates the deployment of applications in software containers.

        In simple terms, Docker encapsulates all application dependencies in a single container. The package carries everything a piece of software needs to run: code, runtime, system tools, system libraries, etc. This innovative configuration makes sure Docker containers run on any computer, any infrastructure, and any cloud. It also guarantees that the application will always work as designed locally.

        Docker eliminates the need to setup developer environments, spin up new instances, or make copies of production code to run locally. It enables users to easily copy their entire live environment and run it on any new endpoint. This portability creates a common framework for developers to collaborate and share applications without worrying about different environment dependencies.

        Docker containers running on a single machine share the same operating system kernel so they start instantly and make more efficient use of RAM. However, each container runs as an isolated process in userspace on the host operating system, which enables developers to use any language and tooling they want, without the risk of causing conflicts. Resource isolation makes Docker architecture significantly faster and more efficient than virtual machines.  

        This groundbreaking new paradigm can yield major gains in efficiency, particularly when it comes to packaging and distributing software, tasks that can represent up to 90 percent of enterprise IT budgets. Gains in speed are also remarkable - users on average ship software seven times more after deploying Docker.

        In April 2015, San Francisco-based Docker, Inc. concluded a $95 million funding round. According to the company, its increasingly popular service has been downloaded over 300 million times.

        In the words of Docker creator Solomon Hykes, "This is about the mass commoditization of the production of software. Docker can have the same impact on software that shipping containers had on world trade."


Conclusion

        The nascent field of automatic programming promises to someday make coding obsolete. Pioneer companies are engaged in enabling computers to understand our language so that everyone has access to the power of creation. This revolutionary work will democratize the technology world, allowing those with no technical background to become the agents of innovation. R&D tax credits are available to support companies working on automated coding and software deployment solutions.


Article Citation List

   


Authors

Charles R Goulding Attorney/CPA, is the President of R&D Tax Savers.

Andressa Bonafé is a Tax Analyst with R&D Tax Savers.

Andrea Albanese is a Project Manager with R&D Tax Savers.


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