Background:

I'm currently part of a team of four: 1 manager, 1 senior developer and 2 developers. We do a range of bespoke in-house systems / projects (e.g. 6-8 weeks) for an organisation of around 3500 staff, as well as all the maintenance and support required from the systems that have been created before. There is not enough of us to do all the work that is potentially coming our way - we're understaffed. Management acknowledge this, but budget restraints limit our ability to recruit additional members to the team (even if we make the salary back in savings).

The Change

This leaves us where we are now. Our manager is due to leave his role for pastures new, leaving a vacancy in the team. Management are using this opportunity to restructure our team which would see the team manager role replaced by another developer and another senior developer. Their logic being that we need more developers, so here's a way of funding it (one of the roles is partially funded from another vacant post).

The team would have no direct line manager and the roles and responsibilities would be divided up between the seniors and the (relatively new to post) service manager (a non-technical role with little-to-no development knowledge/experience whose focus is shared amongst a number of other teams and individuals) - who would be our next actual manager up the food chain.

I guess the final question is:

Is it possible to run a development team without an manager? Have you had experience of this? And what things could go wrong / could be of benefit to us?

I'd ideally like to "see the light" and the benefits of doing things this way, or come up with some points for argument against it.