Management: Harvard's Nolan's 4 stages still hold

To make ICT growth or change understandable to senior management seems not always an evident exercise when having to explain budget requirements. There are our distinct stages in the growth of ICT facilities, each with its distinctive applications, its rewards, its problems, and its managerial issues. By breaking down the evolution of the ICT department into four stages, it is possible to sort out the IT affairs into four sequential packages. The IT budget, plotted over time from initial investment (stage-1) to mature operation (stage-4), forms an S-curve.

Concerning growth of applications :

  • Stage-1 represents typical cost reduction financial applications, such as payroll, accounts receivable & payable, billing.
  • Stage-2 represents proliferation of applications in all functional areas, such as cash flow, general ledger, budgeting, forecasting, personnel inventory, order processing, sales.
  • Stage-3 represents a moratorium on new applications; emphasis is on control, such as purchasing control, scheduling.
  • Stage-4 represents database applications, such as financial planning models, on-line personnel query system, on-line customer query system, on-line source data entry (cost collection, purchasing, etc.)
  • Concerning growth of personnel specialization :

  • Stage-1 represents specialization for computer efficiency, such as operator, programmer.
  • Stage-2 represents specialization to develop a variety of applications, such as systems programmer, scientific programmer, business applications programmer, systems analyst.
  • Stage-3 represents specialization for control and effectiveness assurance, such as systems programmer, functional analyst.
  • Stage-4 represents specialization for database technology and teleprocessing, such as database administrator, network administrator, but also data administrator at management level.
  • Concerning management techniques customarily applied in each of the four stages :

  • Stage-1 represents a small IT department, first-in first-out priorities, lacking controls, no chargeout, loose budgeting, relaxed management.
  • Stage-2 represents informal It project control, assignment of analyst/programmers in the various functional areas, lax controls, few standards, little budget control, IT management moved up in the organization.
  • Stage-3 represents control oriented management, presence of a steering committee, control through centralization, increased maintenance activities; budgets must be justified; initiation of IT project management, chargeout and systems quality control through standards; strong budgetary planning for hardware/software facilities and new applications.
  • Stage-4 represents IT as a separate functional area, decentralization of IT analysts to user areas; systems design & programming take on a consulting role; introduction of database policies & standards; IT manager taking on a higher level position; focus on pricing of IT services; multiple 3-5 year IT-plans for infrastructure, personnel and applications.
  • Concerning responsibility of information :

  • Stage-1 represents IT to be accountable for defining information, with almost no user involvement, which results into imposed systems.
  • Stage-2 represents substantial user involvement in defining information through extensive requirements analyses.
  • Stage-3 represents the user to be primary accountable for defining information; there is little data administration.
  • Stage-4 represents adapting the philosophy that data is a corporate source, which includes data administration at high corporate organizational level; information planning is done by IT based on information supply requirements formalization by the user.
  • Once the applicable Nolan stage has been identified, through careful analyses of the symptoms, the position of the S-curve can be identified which represents the relative budget. Also, the evolution from the applicable Nolan stage to the next
    stage indicates the strategy to be taken by IT in order to move to the next stage. It may occur that more than one stage will apply to the current situation, in which case the lowest stage must have highest priority in order to become synchronous with the higher current stages. Only when a stage has reached full completion, the next stage can be tackled. A mix of stages will always lead to uncontrollable problems. The applicable Nolan stage is the basis for IT planning (strategy & tactics) & budgeting. The Nolan stages have been identified some 30 years ago. They can still be applied, a very simple way to plot ICT budget against results in one single graph. A very handy tool when it comes to top-level management decision making.