Few decades back computers were considered to be a luxurious good where as nowadays Information Technology (IT) and computers are increasingly becoming a necessity to run a business. Evolution of IT within a firm is an interesting area to be read on and many scholars have different ways of explaining evolution of IT within a firm. Nolan (1979) suggested a model to describe the evolution in IT with in a firm and he argued that expenditure on IT will be increased as the firm progress through 06 stages of the model. Nolan’s model on evolution of IT within the business can be visually represented as follows:
Image Source (Knol : A Unit of Knowledge, 2009)
This is where the starting point of IT in an organization. At the initiation stage computers are used as a cost saving measure to store data and mostly the users of IT are the finance department staff such as accountants. Since there are no plans expand IT facilities the growth of IT is paused. At this stage IT is used as a tool to express prestige or obtain publicity of being the first to obtain computers to business. At present, small organizations are still in this stage where only the accounts clerk is involved with computers to handle accounts.
This is the stage at which IT evolves to other areas of business from being limited to finance department. Company invest more on all sorts of applications and loses control. As a result many of the applications fail and company make loses. This is quite common among small to medium firms and most of their IT investments fail due to lack of control.
This is where the formal IT departments arises in the organization. Due to contagion managers are aware that they need to adopt some controlling mechanism to recover their investments. Therefore they formalize IT department by incorporating bureaucracy and control. They focus on saving money rather than earning money from IT department as they have wasted lot of money at contagion stage.
This is where the firm reduces controls introduced in the “Control” stage and introduce the motive for innovation. IT department is given the opportunity to interact with the users of the system to introduce innovation. Firm makes heavy investment in IT to grab innovations to the firm.
This is where the organizational need for information is identified in a proper manner and IT department comes out with a total solution to satisfy the need. The solution for information need is called “Corporate Database”.
This is where IT is incorporated in to the future plans and development of the organization. IT is considered as a tool to achieve competitive advantage and plan for IT is made in line with the business objectives. As a result IT/IS strategy emerges.
Nolan’s model of evolution of IT in the business is widely used by scholars due to many reason such as:
But the model is criticized on many grounds such as:
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