MANAGEMENT INFORMATION SYSTEM NOLAN STAGE HYPOTHESIS The stages-of-growth model is a theoretical model for the growth of information technology (IT) in a business or similar organization. It was developed by Richard L.
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Nolan’s model concerns the general approach to IT in business. The model proposes that evolution of IT in organizations begins slowly in Stage I, the "initiation" stage. This stage is marked by "hands off" user awareness and an emphasis on functional applications to reduce costs. Stage I is followed by further growth of IT in the "contagion" stage. In this stage there is a proliferation of applications as well as the potential for more problems to arise. During Stage III a need for "control" arises. Centralized controls are put in place and a shift occurs from management of computers to management of data resources.
Next, in Stage IV, "integration" of diverse technological solutions evolves. Management of data allows development without increasing IT expenditures in Stage V. Finally, in Stage VI, "maturity",high control is exercised by using all the information from the previous stages.  Stage I – Initiation In this stage, information technology is first introduced into the organization. According to Nolan’s article in 1973, computers were introduced into companies for two reasons. The first reason deals with the company reaching a size where the administrative processes cannot be accomplished without computers.
Also, the success of the business justifies large investment in specialized equipment. The second reason deals with computational needs. Nolan defined the critical size of the company as the most prevalent reason for computer acquisition. Due to the unfamiliarity of personnel with the technology, users tend to take a "hands off" approach to new technology. This introductory software is simple to use and cheap to implement, which provides substantial monetary savings to the company. During this stage, the IT department receives little attention from management and work in a "carefree" atmosphere. 1] Stage I Key points: User awareness is characterized as being "hands off". IT personnel are "specialized for technological learning". IT planning and control is not extensive. There is an emphasis on functional applications to reduce costs. Stage II – Contagion Even though the computers are recognized as “change agents” in Stage I, Nolan acknowledged that many users become alienated by computing. Because of this, Stage II is characterized by a managerial need to explain the potential of computer applications to alienated users.
This leads to the adoption of computers in a range of different areas. A problem that arises in Stage II is that project and budgetary controls are not developed. Unavoidably, this leads to a saturation of existing computer capacity and more sophisticated computer systems being obtained. System sophistication requires employing specialized professionals. Due to the shortage of qualified individuals, implementing these employees results in high salaries. The budget for computer organization rises significantly and causes concern for management.
Although the price of Stage II is high, it is evident that planning and control of computer systems is necessary.  Stage II Key points: There is a proliferation of applications. Users are superficially enthusiastic about using data processing. Management control is even more relaxed. There is a rapid growth of budgets. Treatment of the computer by management is primarily as just a machine. Rapid growth of computer use occurs throughout the organization's functional areas. Computer use is plagued by crisis after crisis. Stage III – Control
Stage III is a reaction against excessive and uncontrolled expenditures of time and money spent on computer systems, and the major problem for management is the organization of tasks for control of computer operating costs. In this stage, project management and management report systems are organized, which leads to development of programming, documentation, and operation standards. During Stage III, a shift occurs from management of computers to management of data resources. This shift is an outcome of analysis of how to increase management control and planning in expending data processing operations.
Also, the shift provides flexibility in data processing that is needed in a case of management’s new controls. The major characteristic of Stage III is reconstruction of data processing operation.  Stage III Key points: There is no reduction in computer use. IT division's importance to the organization is greater. Centralized controls are put in place. Applications are often incompatible or inadequate. There is use of database and communications, often with negative general management reaction. End user frustration is often the outcome. Stage IV – Integration
Stage IV features the adoption of new technology to integrate systems that were previously separate entities. This creates data processing (IT) expenditure growth rates similar to that of Stage II. In the latter half of Stage IV, exclusive reliance on computer controls leads to inefficiencies. The inefficiencies associated with rapid growth may create another wave of problems simultaneously. This is the last stage that Nolan acknowledged in his initial proposal of the stages of growth in 1973.  Stage IV Key points: There is rise of control by the users.
A larger data processing budget growth exists. There is greater demand for on-line database facilities. Data processing department now operates like a computer utility. There is formal planning and control within data processing. Users are more accountable for their applications. The use of steering committees, applications financial planning becomes important. Data processing has better management controls and set standards. Stage V – Data administration Nolan determined that four stages were not enough to describe the proliferation of IT in an organization and added Stage V in 1979.
Stage V features a new emphasis on managing corporate data rather than IT. Like the proceeding Stage VI, it is marked by the development and maturity of the new concept of data administration.  Stage V Key points: Data administration is introduced. There is identification of data similarities, its usage, and its meanings within the whole organization. The applications portfolio is integrated into the organization. Data processing department now serves more as an administrator of data resources than of machines.
A key difference is the use of term IT/IS rather than data processing.. Stage VI – Maturity Stage VI Key points: Systems now reflect the real information needs of the organization. Data processing organisation is viewed solely as a data resource function. Data processing now emphasizes data resource strategic planning. Ultimately, users and DP department jointly responsible for the use of data resources within the organization
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