The R&D Tax Credit Aspects of Mobile Applications
Mobile-Applications
Mobile application usage has never been
higher. In fact, it has become an essential part of the mobile
experience. According to global information and measurement
company Nielsen, the average time a person spends engaging on
apps every month increased 63 percent in two years, rising
from 23 hours per month in 2012 to 37 hours in 2014.
This unprecedented
demand fuels an increasingly competitive marketplace, where
millions of apps are already available and more are created
every day. The present article will discuss recent trends in
the rapidly evolving mobile app industry and present the
R&D tax credit opportunity available for those using
innovation as a means to thrive in the mobile era.
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
On December 18, 2015
President Obama signed the bill making the R&D Tax Credit
permanent. Beginning in 2016, the R&D credit can be
used to offset Alternative Minimum tax and startup businesses
can utilize the credit against $250,000 per year in payroll
taxes.
The Era of Mobile Apps
A recent study University of Alabama study
estimates that there will be 10 billion mobile internet
devices in use globally by 2016. This means 1.4 devices per
person on the planet. The Internet of Things and wearable
technologies promise to accentuate this trend, considerably
increasing the number of gadgets used by the average person.
As a result, the mobile
applications market should experience a compound annual growth
rate of 16.2 percent between 2014 and 2020, reaching $54.9
billion by the end of this period. The total number of apps
downloaded will reach 268 million by 2017, creating
significant business opportunities. For instance, in 2016,
revenue from mobile advertising will be worth four times its
2011 value.
A report from
Transparency Market Research defines mobile applications as
“user-friendly software designed for operation on mobile
devices such as smartphones, tablets, and other handheld
devices.” It presents six major categories within the mobile
app market, namely,
- Games and entertainment
- Productivity
- Social and personalization
- Music and lifestyle
- Travel and navigation
- Other (business, finance &
utilities applications)
When it comes to store
types, apps are classified as native (on-deck) or third-party
(off-deck).
Overcoming App
Development Challenges
Companies find it increasingly challenging
to rapidly develop, deploy, and maintain mobile applications.
Besides adding functionality and robustness to apps, marketers
must find a way to stand out in this competitive environment.
A June 2015 Gartner
report underlines the difficulties in meeting rising
performance and usability standards. The study estimates the
demand for enterprise mobile apps will grow at least five
times faster than internal IT organizations’ capacity to
deliver them and urges mobile strategists to “use tools and
techniques that match the increase in mobile app needs within
their organizations.”
An earlier Gartner study
finds that the majority of companies remain in the early
stages of mobility, struggling with how to start app
development or to scale up operations. Kishore Khandavalli,
founder of Dallas-based SevenTablets, argues that most
companies consider apps as a modified version of their
websites and points out that less than 30 percent of them have
established a real mobile strategy. According to Mr.
Khandavalli, a company with complex operations needs as many
20 different apps to meet the needs of both its employees and
customers.
Gartner suggests four
best practices for those willing to bridge the gap between
mobile app demand and supply:
- Value-driven prioritization of app
development based on the needs of business stakeholders.
- A bimodal IT approach where the
first mode focuses on integration (retrieving and
delivering data to back-end systems) and the second mode
creates front-end app features.
- Use of rapid mobile app
development tools that replace traditional coding and
allow those with no programming background to design and
iterate prototypes.
- A mixed-sourcing approach based on
both in-house and outsourced third parties.
Trends &
Opportunities
In a rapidly evolving, market such as the
one of mobile applications, it is important to keep an eye out
for the latest trends and businesses opportunities. The
following paragraphs highlight the most promising areas for
app development innovation.
Faster Development
The mobile world moves
fast. Consumer preferences change in a heartbeat. For this
reason, companies must keep up with demand, capitalizing on
business opportunities as they appear. In practical terms,
this means reducing the development lifecycle of mobile
applications.
An increasing number of
companies are engaged in delivering innovative solutions that
help shorten the time gap between app ideation and launch.
They commonly consist of user friendly, ‘low-code’ or
‘no-code’ solutions that enable anyone, despite technical
knowledge, to create, deploy, and manage apps. Their
simplified approach to mobile development enables considerable
reductions in time and costs while adding flexibility to the
prototyping process.
Visual programming is a
big part of rapid mobile development. NY startup Bubble, for
instance, has created a platform that allows people with no
coding skills to create their own apps. With a drag-and-drop
interface, workflow logic, as well as video tutorials and
lessons, the solution makes app development completely
accessible to people with no experience. Used by over 3,500
subscribers, Bubble’s cloud-based tool has no predetermined
templates, so that each application can be unique.
Headquartered in
Atlanta, GA, OutSystems is one of the leading rapid app
delivery companies on the market. The OutSystems platform
covers the entire lifecycle: development, quality assurance,
integration, deployment, monitoring, and management. It
combines visual development with one-click deployments,
enabling customers to run applications across multiple
platforms in less than 20 percent of the time of traditional
methods. It also features an open and extensible model that
ensures code portability so apps that are developed in the
platform can be run in other tools.
Cloud Technology
Cloud technology has
played a major role in the recent multiplication of mobile
apps. It has enabled an exponential growth in app
functionality, with data storage and processing now happening
outside the mobile device. The benefits of cloud applications
include a richer user experience, enhanced responsiveness, and
offline mode.
Many notable companies
run their apps in the cloud, including Instagram, Pinterest,
Netflix, and Foursquare. A recent survey of IT executives has
pointed to three reasons why apps are migrating to the cloud:
1) accessibility to data from multiple devices; 2) lower
costs; and 3) increased speed for business.
Besides enabling the
creation of powerful, cross-device apps, cloud technology has
also simplified app development. New Hampshire based Snappii,
for instance, has created a software-as-a-service solution for
developing sophisticated mobile business apps. Using the
innovative, cloud-based LiveBuild model, it enables customers
to build the app in the cloud and make it function right away.
The same simplicity goes for updates, which are instantly made
in just one click.
Another example of
cloud-based app development platform is Appery.io, which
recently reached 250 thousand users. Designed by California
based Appery, the solution creates cross-device applications
using visual programming and optional coding. Since it runs in
the cloud, there is no need to install or download the app
builder. The cloud-based framework also facilitates
collaboration so multiple team members can easily access
projects in real-time.
App Security
App security
gaps have been a major threat and concern. A 2014 Gartner
study predicted that 75 percent of mobile applications would
fail basic security tests the following year. The same report
stated that, through 2017, app security breaches would be
mostly caused by misconfiguration rather than “deeply
technical attacks on mobile devices.”
Chicago startup Keeper,
which recently signed up Samsung as a customer, is an example
of the central role of security in the mobile world. According
to the company founder, Darren Guccione, as a result of recent
deals, Keeper’s password-security app will be preloaded on
tens of millions of new smartphones over the next year and a
half.
The innovative company
promises encrypted password security (via a single master
password for each user) and secure storage of photos and
files. On November 17, Keeper launched a new version for
Android 6.0 Marshmallow, which offers support for fingerprint
security as well as auto fill capabilities.
Beacons
Beacons
represent a new paradigm in indoor communication. They are
low-cost, low-powered transmitters that communicate with smart
devices via Bluetooth Low Energy (BLE) technology. When in
proximity to such devices, they trigger activity in mobile
applications, allowing them to understand their position on a
micro-local scale and to pull specific data from the web,
based on location.
BLE-enabled beacons have
a broadcast range of around 100 meters and are therefore ideal
for indoor tracking and awareness. All beacons have a unique
identity and offer non-invasive, one-way communication. By
enabling apps to communicate with users via Bluetooth, beacons
redraw the line between online and offline, opening up the way
for a new wave of innovation.
The creation of
beacon-friendly applications and the incorporation of beacon
capabilities into existing applications can change the way
retailers, event organizers, transit systems, enterprises, and
educational institutions interact with people in indoor
spaces. A 2014 Business Insider Intelligence report predicts
that the number of installed beacons would grow 287 percent in
the following four years, reaching five million units.
Silicon Valley based
Shopkick was one of the first companies to implement beacon
technology in retail settings. Ranked by Nielsen as the most
widely and often used real world shopping app, Shopkick helps
retailers make the in-store experience more personal and
rewarding. Some of the companies using “shopBeacon” devices
include American Eagle Outfitters, Best Buy, J.C. Penney,
Macy's, MasterCard, among many others.
Wearable Technology
According to
the International Data Corporation, the global wearables
market will experience a 45.1 percent CAGR between 2014 and
2019, reaching 126.1 million units by the end of this period.
New vendors and devices
along with enhanced end-user awareness are the most important
drivers of this increasing demand. Smart wearables, which are
capable of running third-party applications, were expected to
reach 25.7 million units in 2015, up 510.9 percent from
2014.
As a result of such
trends, the demand for wearable apps is higher than ever. For
now, the most popular applications focus on health and
fitness, however, they start to expand towards other areas
such as security, workplace productivity, and collaboration,
etc.
Though cross-device
applications, which work both on wearable and mobile devices,
have been seen as a promising category, experts believe in the
emergence of fundamentally new apps that capitalize on the
uniqueness of wearables.
Internet of Things
Powered by the use of
sensors, actuators, and data communication technology, the IoT
creates a new world of ubiquitous connectivity. In this
scenario, objects become strategic tools for collecting
information and responding to it.
A June 2015 report from
McKinsey & Company’s Global Institute estimates that the
IoT market could reach $11 trillion by 2025. Entitled “The
Internet of Things: Mapping the Value beyond the Hype”, the
study points out that the hype may actually understate the
full potential of the Internet of Things – “but that capturing
its maximum benefits will require an understanding of where
real value can be created and successfully addressing a set of
systems issues, including interoperability.”
The fact is that the
digitalization of the physical world creates major
opportunities for innovation in mobile app development. From
controlling home appliances to remotely gathering
meteorological data, such applications are the gateways to a
myriad of potential benefits. Not only do they link IoT and
mobility, but they add value to the connectivity by processing
information and presenting it in useful ways.
Many companies are
engaged in creating “IoT platforms” that facilitate the
development of apps targeted at the Internet of Things. They
often feature an ingestion tier for incoming-data storage, an
analytics tier, activation and management capabilities, as
well as an application program interface that enables
communication between the platform and the app.
Acquired by PTC in 2013
for approximately $112 million, Pennsylvania based ThingWorx
is an interesting example. The innovative platform is designed
to build and run IoT applications while reducing time, costs,
and risks. In October 2015, ThingWorx announced a partnership
with Amazon Web Services (AWS) that will enable developers to
combine the scale and elasticity of AWS with the productivity
advantages of ThingWorx’s Application Enablement
Platform.
Big Data Analytics
Successful app
development is increasingly linked to the so-called big data,
which has the potential to shed light on customers’ behavior
and decision-making processes, allowing companies to take
advantage of business opportunities while enhancing user
experience.
Tackling actionable
insights that hide behind massive amounts of data requires a
powerful virtual architecture. There is continuous pressure to
meet rising performance standards while minimizing management
burdens. Cloud-based applications are an alternative for
companies willing to overcome infrastructural difficulties,
such as costs, storage, and elasticity. In the words of Ahish
Thusoo, founder of Qubole, a provider of a self-service
platform for big data analytics, “there is no “one-size fits
all” infrastructure solution. What makes the cloud attractive
is its elastic infrastructure, which can enable other
dimensions that make the business more agile and high
performing.”
There are numerous
examples of data-driven mobile applications aimed at a wide
variety of purposes. Headquartered in San Diego, CA, Roambi is
an app that responds to the needs of an increasingly mobile
workforce. The Roambi app allows workers to access and analyze
business data to make informed, on-the-go decisions.
Promising Industries
for Mobile Apps
As mobile applications become an
increasingly important aspect of our personal and professional
lives, it is difficult to point out which areas show the most
promise for app development. As a matter of fact, innovative
tools and ideas can lead to the creation of highly successful
apps in any industry. Nonetheless, the following sections list
some of the areas in which mobile apps are multiplying at a
remarkably fast pace.
Healthcare
Mobile devices can
greatly contribute to improving patient care, making it more
convenient, cost-effective, and focused on prevention.
Innovative telemedicine and remote healthcare mobile
applications shorten the distances between doctors and
patients and giving doctors easy and timely access to
information.
According to the U.S.
FDA, 500 million smartphone users worldwide were expected to
be using a healthcare application by 2015. By 2018, this
number should surge, with 50 percent of the more than 3.4
billion smartphone and tablet users having downloaded mobile
health applications.
Examples of innovative
healthcare apps include DoctorOnDemand, which facilitates
quick video consultations with physicians from $40 per
appointment, and HealthTap, which follows the same
telemedicine logic with the advantage of allowing patients to
consult with personal doctors provided that they join the
platform.
When it comes to
monitoring health data, the RevUP app by MD Revolution
connects users with health and wellness experts that help them
track relevant information and provide guidance and
recommendations. Similarly, Microsoft’s HealthVault App
enables users to keep their medical records up-to-date with
manual and automatic data input. The app can be connected to
smart medical devices, fitness trackers, scales and other apps
in order to receive real-time information about the
user.
Manufacturing
Manufacturing companies
are increasingly turning to mobility as a driver of
operational efficiencies. According to Simon Jacobson, a
Gartner analyst, "There has been much more activity in
mobility in general, whether it's iPad-, iPhone- or
Android-based, in the manufacturing environment. If you're a
vendor seeking to sell into any operational environment and
you don't have a mobile capability, the odds of you being
considered strategic by your clients is pretty
minimal.”
A survey by cloud-based
software company Canvas revealed the most frequent use of
mobile applications in manufacturing environments so far – 48%
used mobile inspection apps; 36% used mobile work order apps;
23% used mobile survey apps; 21% used apps for invoicing; 18%
used mobile checklist apps; 6% used mobile inventory apps; and
23% used mobile apps for other processes.
Mobile applications help
manufacturers keep up with key performance indicators and
allow them to capitalize on sensors and location-based
technology. With unprecedented access to production data, they
can avoid errors, maximize resource utilization, and increase
overall productivity.
The need for targeted
solutions that are specially designed for each manufacturing
environment has led manufacturers to roll out their own apps.
According to a recent study by Evans Data Corporation,
companies themselves created 42.6 percent of big data apps in
the manufacturing sector, which concentrates the third highest
share of programmers creating big data and analytics
applications (10.9 percent), compared to other
industries.
Kawasaki Motors
Manufacturing Corp., USA is an interesting example. The
company replaced its card-based system by a custom app
designed to offer better management of just-in-time
operations. This more efficient, electronic method ultimately
resulted in $3,500 in operational savings per day.
Compliance with
regulation and legacy systems integration are two important
barriers when creating apps for the manufacturing sector.
Companies willing to take advantage of mobility should focus
on developing innovative ways to overcome these limitations.
Retail
As smartphones become
the primary screen choice for consumers, mobility gains
strategic importance for retailers. In the words of Michael
Jones, Senior VP, Retailer and Brand Solutions of RetailMeNot,
mobile has become “the most important touch point for
retailers to win, serve, and retain customers.”
Mobile applications can
help retailers engage consumers both in-store and through
e-commerce, creating a more autonomous and customized shopping
experience. A recent survey by Apptentive revealed that 88
percent of respondents used retail mobile apps, 51 percent of
which used retail apps while shopping in-store. The top five
reasons for using apps in-store include: redeeming discounts,
comparing prices, earning rewards points, reading about
product features, and finding products.
The rise of the
so-called “mobile shopper” creates endless opportunities for
new and unique interactions, strengthening brand loyalty and
driving sales. By downloading the Macy’s app, retailers can
use their smartphones to find their way through the store to
the products they are seeking. With J.C. Penney’s app,
customers can take a picture of items they see on the street
and check if the store has similar ones in stock. Staples is
working on an app that enables users to compare store prices
with those of Amazon and other competitors.
Education
According to an Insight Premium
report, the global market for mobile learning products and
services reached $5.3 billion in 2012. With a forecasted 18.2
percent CAGR for the following five years, the market is
expected to reach $12.2 billion by 2016.
Mobile apps facilitate
education, making it easier and more affordable. From
textbooks to online classes and tutorials, “m-learning” has
gained the status of an educational game-changer. In 2013, the
U.S. tablet market in schools raised by 103 percent. In the
same year, a survey of mobile learners revealed that 99
percent of them agreed that the mobile format enhanced
learning and the totality of them would go back to this format
for further training.
M-learning is
particularly interesting for companies, which can profit from
its flexibility and experience significant returns on
investment. Reduced instructor and travel costs are just two
examples of how mobile training can positively affect the
bottom line. Located in Peoria, Illinois, CSE Software is an
example of innovation in customized m-learning apps. The
company creates educational materials for tablet devices,
giving clients the opportunity to incorporate audio and video,
interactive graphics, and calculators into their books,
brochures, and presentations.
Financial Services
The unprecedented
proliferation of smart devices is pushing banks and financial
service companies towards mobile solutions that fit the
demands of modern consumers. Innovation has become the
watchword as customers increasingly condition their financial
choices on convenience and ease of use.
Mobile banking
applications bring major opportunities for financial
institutions, particularly when it comes to cutting expenses.
While the average cost of a mobile transaction is only 10
cents, this cost nearly doubles for desktop computer
transactions. More strikingly, ATM transactions cost on
average $1.25.
Banking apps also emerge
as an important weapon in the battle to retain customers. Not
only do they provide numerous gateways to promote customer
loyalty but they also serve as data gathering platforms,
generating unprecedented information on users' behaviors and
preferences.
Innovation trends in
mobile financial services include imaging technology, which
allows for checks to be deposited with the snap of a picture;
mobile person-to-person payment apps, which create virtual
wallets linked to users’ banking accounts/credit cards; mobile
or branchless banks, specially designed for on-the-go,
fee-averse users; and mobile crowdfunding apps that give
enhanced visibility to projects, making them accessible to
investors anytime, anywhere.
Conclusion
Mobile applications are changing the way we
live and do business. They create major opportunities for
companies to explore new and exciting interactions with their
customers and employees. From retail to manufacturing,
virtually every industry can take advantage of the so-called
mobile revolution. To do so, however, they must keep up with a
rapidly evolving industry and capitalize on emerging trends,
such as fast mobile development and the IoT. Federal and
state R&D Tax credits are available to help stimulate and
support mobile application developments.
