Indigo Technologies Ltd. was shooting itself in the foot. The Toronto-based custom software house charges its clients based on projected costs, but the company was doing such a lousy job of projecting those costs that it sometimes undercharged by a factor of four.

"When we undercut by that much, we wind up swallowing a lot of the cost," says Gene Goykhman, president and cofounder of the $400,000 (Canadian) company. "We had to get that situation under control."

Time and budget overruns are persistent evils in many industries, including software development, but Goykhman didn't consider them necessary ones. The trick, he believed, was to calculate to the minute how long each employee was spending on each task and to use that information to formulate quotes anchored in reality.

After failed experiments with paper time sheets (too easy to ignore) and commercial time-management packages (too tough to access), Indigo Technologies decided to build its own solution. The chief requirements: that it be painless to use and that it let the company "analyze what we had done and where we went over," says Goykhman. One designer and two developers set to work on the project. Six months and about $10,000 later, TaskMaster was born.

TaskMaster, which runs on Windows 95 or Windows NT, sits on every desktop in the company. Whenever employees switch tasks, they click on an icon, and a message pops up: "What have you been working on?" The workers then select an activity--meeting with a client, testing the product, creating documentation--from a 15-item menu. When they're through with that activity, they click on the icon again, and a built-in timer tells them exactly how long they spent on it. Employees then begin another task, and once again TaskMaster's clock begins ticking.

TaskMaster automatically sends E-mail to management each day with reports of how much work has been done on every part of every project. Goykhman emphasizes that those work reports are not used to monitor employee industriousness. "Our environment here is very flexible, and we don't care how much people work on any given day," he says. "We are very careful to keep the Big Brother aspect out of it."

What Goykhman does use the data for is heavy-duty analysis of how much time is devoted to things like bug fixes and user-interface design. As a result, the company has been able to concentrate on areas that need fixing and, more important, create far more realistic timelines and cost estimates for clients. Managers can also better grasp the scope of internal projects. For example, a marketing brochure that was estimated to take 40 hours to produce actually ended up taking 191.

Initially, there was some resistance to TaskMaster, but Goykhman says most employees are now completely sold on the technology. "Even the developers, who were the hardest ones to get into this, are making much better estimates of how long things are taking," says Goykhman. "They really appreciate that."