International Journal of Information Technology Project Management, 2(1), 1-18, January-March 2011 1 Copyright © 2011, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. Keywords: Activity Based Costing, Lifecycle Costing, Performance Management, Productivity, Project Management, Software Engineering, Variation Analysis INTROduCTION The challenges of performance measurement as a tool of project management in software engineering are twofold. On the one hand an efficiency control requires adequate metrics to assess the productivity of software develop- ment by means of input-output-relations. The multitude of existing metrics already clarifies the missing unambiguousness in this field: for an up to date and broad overview of software metrics research see Kitchenham (2010) and for details Anseimo and Ledgard (2003), Choi Performance Management in Software Engineering Markus Ilg, Vorarlberg University of Applied Sciences, Austria Alexander Baumeister, Saarland University, Germany AbSTRACT Performance measurement in software engineering has to meet a multiplicity of challenges. Oftentimes, traditional metrics focus on sequential development instead of using incremental and iterative development. Output is measured on a pure quantitative (e.g., SLOC), quality-disregarding basis. A project’s input is hard to assign properly using enterprise-unspeciic forecasting tools which have to be calibrated at irst and which do not account for time preferences. Requirements necessary for behaviourally adjusted project management and control are rarely discussed. Focusing on these shortcomings, this paper proposes an enterprise-speciic approach which combines lifecycle and activity based costing techniques for software development following the incremental and iterative Uniied Process model. Key advantages are calibration effort can be avoided, project management decisions are supported by a clear managerial accounting emphasis, precise milestone- depending cost objectives can be determined as the basis for personnel management and control of develop- ment teams, and cost and time variance analysis can be supported in a sophisticated way. and Kim (2005), Foulds and West (2007), Kitchenham and Mendes (2004), Maxwell and Forselius (2000) or Pfleeger (2008). Faroo- quie and Farooquie (2009) provide empirical evidence on performance measurement. Yet, some problems arise by focusing metrics on traditional sequential software development processes instead of using incremental and itera- tive development (IID) techniques (Tan et al., 2009; Yu, 2010). On the other hand anticipative personnel project management aims to activate behaviour in accordance with the software de- velopment objectives. Requirements discussed in responsibility accounting, for example the realistic but challenging setting of objectives DOI: 10.4018/jitpm.2011010101