Table:
|  | Year Ended December 31, |  | Change |  |
| --- | --- | --- | --- | --- |
|  | 2018 | 2017 | $ | % |
|  |  | (dollars in thousands) |  |  |
| Research and development | $ 41,305 | $ 22,241 | $ 19,064 | 85.7% |
| % of revenue | 28% | 21% |  |  |
Paragraphs:
Research and Development Expense
Research and development expense increased by $19.1 million in 2018 compared to 2017. The increase was primarily due to a $18.1 million increase in employee-related costs, which includes stock-based compensation, associated with our increased headcount from 159 employees as of December 31, 2017 to 229 employees as of December 31, 2018. The remaining increase was principally the result of a $2.9 million increase in hosting and software related cost to support research and development activities and an increase of $0.3 million in software subscription cost which was offset by a $1.0 million decrease in office related expenses to support research and development activities. A total of $7.8 million of internally-developed software costs during 2018 and $6.3 million of internally-developed software costs during 2017 were capitalized, resulting in a decrease of the expense by $1.4 million compared to 2017.
Question:
What caused the increase in research and development expense?