Information systems: Investment levels over time

IS expenditure will increase over time, but if one take into account the concept of IS maturity models, such as Nolan’s, the gradient of that upward trend should rise and fall with the stage of maturity. Therefore, it is inevitable and desirable that relative investment levels will vary by the degree of maturity in the use and management of IS.

Nolan’s model

In the stages of growth Models, the basic premise is that any organization will move through stages of maturity with respect to the use and management of IS.  This model of stages offers an attempt to help managers interpret the position, and the meaning of that position, of their org with respect to IS.

  1. Initiation –Introduction of computing into the organization to meet basic needs.  At this stage there is a lack of management interest.
  2. Expansion – Rapid growth in computing use due to top management commitment to exploiting computing potential plus high expectations among users, a stage of unplanned growth. Budgets grow.
  3. Formalization – Cost control measures is now being instituted by top management and planning becomes a major priority. Concentration is on systems to save money, very little upon systems to make money.
  4. Integration – controls are refined to allow exploitation of computing without runaway costs. Operations are more rational and users are more knowledgeable and capable in their uses of computing.
  5. Data administration – The  organization’s requirements for information drive the developments during this stage.  Great recognition of the business value of cross-functional data access.
  6. Maturity – Planning and development of IS in the org is embedded into the business’ development.


Once management has determined their IS’s stage of maturity, they can increase or decrease IS investment accordingly. The expansion and integration stages are associated with very steep rises. 


The logic of the model runs as follows: The major activities in the management of computing are identifiable in stages that correspond to periods of stability along the growth path of computing use, traced by changes in computing budgets which act as a surrogate measure of environmental and technical variables that make up the computing phenomenon in an organization.  Management practices related to computing are thus explained as responses to environmental and technical changes.


Nolan claims in his 1973 paper that no organization had reached Stage 4 – Integration, but that they would begin to do so soon and growth in computing costs would begin to decline as they did so.

Logic of Nolan's model explained

The underlying logic of most stages of growth models is that organizations undergo transformations in their design characteristics which enable them to face new tasks or problems that growth brings about.  Generally, there is empirical support for the evolution of IS through stages of growth.  Some say it is necessary for IS to go through certain stages of development in order for end users to adjust their needs.