nation’s GNP and employing over 80% of the workforce.^5 These trends have put the
United States in the position of being a net exporter of services internationally. Sim-
ilar changes are taking place in the other world markets, for example, in Europe, and
the world market for services is growing at a rate twice that of product trade.
A number of factors distinguish service from manufacturing, including intangibil-
ity, inseparability of production and consumption, heterogeneity, and perishability,
which affect a firm’s technology infrastructure. Probably intangibilityis the key dif-
ferentiating factor. A manufacturing firm, in producing a physical product, needs to
attend to the product during its development, production, and support life cycle. A
service firm, however, just needs to deliver its service, be that consulting, advertis-
ing, or the like. This reduces greatly the number of application systems that are
needed and the volume of transaction activity when compared with a manufacturing
firm, although it may place additional demands on the sophistication of the technol-
ogy used, for example, being able to handle multimedia, or to support World Wide
Web (WWW) publishing.
Another difference between service and manufacturing firms is that service firms
tend to be less capital intensive. This explains, partially, the rapid move to fully au-
tonomous service subsidiaries in foreign countries. A major motive for a service firm
going abroad is to service home country clients in foreign countries.
In a study of technology among international service and manufacturing firms,
Deans and Kane^6 found that different profiles existed. Service firms were most con-
cerned with data security and equipment utilization and least concerned about local
cultural constraints. Manufacturing firms, on the other hand, were most concerned
about educating senior personnel and international protocol standards while being
least concerned about currency restrictions and exchange rate volatility. These dif-
ferences probably reflect differences in business activities between service and man-
ufacturing firms as well as differences in the characteristics of their technology in-
frastructures. For example, the more homogeneous nature of service staffs when
compared to the range of job classifications in manufacturing may account for man-
ufacturing’s concern about educating senior staff. Since many service employees
come from the home country, local culture is less of an issue for them.
A study by Kane (1986) suggests that multinational companies organize their data
processing operations differently domestically than they do internationally. In the
United States, 42% of their data processing operations are centralized^7 while 30% are
decentralized. Abroad, these firms have only 17% of their data processing central-
ized, while 59% is decentralized. The proportion organized in a distributed manner is
about the same in both cases 28 versus 24%. Interestingly, 22% of these multinational
companies had centralized domestic data processing organizations and decentralized
data processing in their foreign subsidiaries. The conclusion is that data processing
in domestic multinational firms tends to be centralized while it is more likely to be
decentralized in these firms’ foreign subsidiaries. Part of the explanation for this may
28 • 6 INTERNATIONAL INFORMATION SYSTEMS(^5) Deans & Kane, 1992.
(^6) Id.
(^7) Centralized computing would be where all work was sent to one, or a few, locations for processing.
Decentralized computing is where each major organizational unit has its own computing resources. Dis-
tributed computing makes use of a network to route processing to an appropriate location where the job
is run. In distributed processing, a portion of an application may run locally while another portion runs
remotely, elsewhere on the network.