As excessive budget and schedule compression becomes the norm in
today's software industry, an understanding of its impact on software
development performance is crucial for effective management
strategies. Previous software engineering research has implied a
nonlinear impact of schedule pressure on software development
outcomes. Borrowing insights from organizational studies, we formalize
the effects of budget and schedule pressure on software cycle time and
effort as U-shaped functions. The research models were empirically
tested with data from a 25 billion/year international technology firm,
where estimation bias is consciously minimized and potential
confounding variables are properly tracked. We found that controlling
for software process, size, complexity, and conformance quality,
budget pressure, a less researched construct, has significant U-shaped
relationships with development cycle time and development effort. On
the other hand, contrary to our prediction, schedule pressure did not
display significant nonlinear impact on development outcomes. A
further exploration of the sampled projects revealed that the
involvement of clients in the software development might have
¡Èeroded¡É the potential benefits of schedule pressure. This study
indicates the importance of budget pressure in software
development. Meanwhile, it implies that achieving the potential
positive effect of schedule pressure requires cooperation between
clients and software development teams.