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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 ldquoerodedrdquo 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.