Bankers see extensive expenditures in information technology as the inevitable price of a prosperous future. Yet how can they be sure that the information technology (IT) department itself is meeting the operational objectives of the institution: efficiency, cost effectiveness and customer service?

A recognized practice in the business world at large over the years, activity-based costing gauges efficiency in objective, quantifiable ways. It enables senior executives to compare their respective organization's performance with the rest of the industry, as well as with their own expectations (see chart). The practice is now being applied to IT in the financial services industry.

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