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What criteria should a software company use to decide if they need to introduce a project management role into their team? From what I have seen, most companies start out with no project managers, and large corporations are usually full of them.
What happens in between to make that transition necessary?
We should start with distinction of project management as role and project manager as job. Some tasks which are typically understood as project managerish are there even in small projects, however they don't have to be done by a person who has "project manager" printed on a business card.
Usually, as the organization grows, first people who start acting like project managers are team managers. After some time company leaders realize it would be beneficial to have project managers and let team managers do their job, which is leading teams. If I had to guess I'd say it happens when company size is somewhere between 25 and 75 people.
However there are a lot of specific situations where it would work differently. One of examples can be agile organizations, where formal project manager job doesn't have to be introduced as their tasks are spread over different roles, e.g. in Scrum over the whole team, including Product Owner and Scrum Master. If the company follow this kind of approach rather conservatively they can avoid hiring project managers for quite a long time, which of course doesn't mean project management tasks aren't done.
Also it is usually important what kind of clients you deal with. The bigger and more formalized organization as a client the faster you have project managers on your side as those clients just expect that you have them in your team.
Consider staring with a project lead, i.e., a more senior person who still also an individual contributor.
A company needs a project manager when there are projects to manage. Don't get me wrong, I'm not just expressing the obvious: not all companies have projects to manage. If you look at an existing small bakery, for example, there are probably no real enterprise projects, and so, no project manager.
If you want your company to think in a project-oriented way and manage novelty under the form of projects, you need project managers.
A project manager is really a change agent. His job is to force a change in the organization, like a new product or a new process.
As long as your organization is in a state of continual change, you can do without project managers. One company I worked at grew to 100M turnover without any formal project structure. It was a very nice place to work.
following Prince2 if you start a project 2 roles are required: the executive and project manager. These are required to have in any project.
The executive represents the project board, users and suppliers.
The project manager can represent Team managers, teams, developers, etc...
So actually if you talk about a project... there is always a PM.
I think the question is more: who gets which roles and resposibilities?
And that completely depends on the project (size, scope, cost, company fillosophy, etc...)
What happens in between to make that transition necessary?
A necessity to assign responsibility. As soon as you establish a formal position of a Project Manager you can implement project management as it is dictated by PMBOK. Without a formal declaration of rights and responsibilities you will have a lot of "project coordinators" doing everything except project management (see PMBOK 4th Guide, page 13 "Role of Project Managers").
From my experience it is problematic to have the role of "project manager" and "software developer" assigned to one person because the role of the "project manager" (calculating efforts, schedules, ...) will suffer when the solution must be finished as soon as possible. ("Why should i waste my time with these calculations?")
