Balancing Structure and Flexibility in Growing Software Development Companies

Abstract: Due to increasing competition in the market, software development companies need to constantly update their processes and keep their costs down to remain competitive. Small software development companies often lack financial resources and specialist expertise, making this increasingly difficult. Even though as much as 98.9% of software development companies are small, most research focuses on larger companies. One of the main advantages of being a small software development company is the flexibility and speed in operations that are enabled by unstructured development processes and lack of hierarchical organizational structures. On the other hand, this lack of structure can hinder growth. This thesis has aimed to increase the knowledge on how to balance structure and flexibility in small software development companies, by investigating the effects of added structure.  To achieve this, a qualitative case study was conducted, including six case companies that had successfully grown from small to medium-sized companies. The findings show that it is crucial to add structure to grow, but that depending on the type of structure added, it can lead to increased flexibility. By introducing organizational structures where teams of developers are allowed to self-organize to improve a given metric within a defined area of responsibility, the flexibility can increase along with increased structure. The results further show that although time-consuming in the short run, extended development processes in the form of additional quality practices can save time in the long run. Lastly, the results show that it is difficult to add structure and that this should be done in the form of small, iterative changes over time rather than performing extensive reorganizations.