Turning Products into Services and Services into Products: Contradictory Implications of Information Technology in the Service Economy

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Abstract:

Service industry sectors of modern economies are growing rapidly, in absolute size and in comparison to the manufacturing, agriculture, and other economic sectors. Implicit in the dramatic proclamations that have accompanied this worldwide shift
to the service economy is a subtext about the displacement and subordination of products. The notion of displacement speaks,
in a straightforward way, to the diminishing relative importance that material products play in production and consumption
and, hence, in providing opportunities for employment. That information and communication technology (ICT) enabled innovation
has played a crucial role in the emerging dominance of services is well known, for example, in all aspects of financial service
sectors. Subordination is more interesting because it has to do with the changing and unsettled relationship between products and services and, indeed, ambiguity in the very definition of “service” itself. This subordination has taken
a variety of forms:
• 
Producers and purveyors of products add information-intensive service dimensions in order to enhance relationships with customers
and, in some cases, to generate network effects among the customers themselves (e.g., Amazon.com’s online customer reviews
of books and data-based book recommendations).
• 
Products themselves have become servicitized in the sense that a product comes with a service component that is crucial in
fully constituting the product as a meaningful “solution” for the purchaser (Vandermerwe and Rada 1988). The delivery of these
components is often ICT-enabled (e.g., call centers in support of consumer electronic products).
• 
We witness the servicitization of products in an alternative sense, where the purchaser never takes possession of the material
product but rather subscribes to the service that the product provides, with the purveyor maintaining ownership of the physical
asset (e.g., ASP models of computer or software use and outsourcing of certain other kinds).