Stages-of-growth model

OLAY is a theoretical model for the growth of information technology (IT) in a business or similar organization. It was developed by Richard L. Nolan during the 1970s, and described by him in the Harvard Business Review.

Both articles describing the stages were first published in the Harvard Business Review. The first proposal was made in 1973 and consisted of only four stages. Two additional stages were added in 1979 to complete his six stage model.

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.

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.

Even though the computers are recognised as “change agents” in Stage I, Nolan acknowledged that many users become alienated by computing. Because of this, Stage II is characterised 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 specialised professionals. Due to the shortage of qualified individuals, implementing these employees results in high salaries. The budget for computer organisation 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.

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