If you look at IBM's business last year, services revenues were roughly 55%, while systems (hardware) and software revenues were around 25% and 20% respectively. But services constituted around one-third of the company's profit, for a very simple reason. Systems and software products leverage technology assets and apply engineering principles to improve quality, scale-up capacity, and achieve higher productivity and profit margins. Services, on the other hand, have historically been significantly more labor-based, less prone to economies of scale, subject to higher quality variations, and generally less productive and profitable.
The picture is similar across most businesses around the world. Services are an increasing portion of their revenues, but they are more labor-intensive than their product-based revenues and therefore not as profitable.
Another way to appreciate the increased importance of services is to look at the three main sectors into which economies are usually grouped - the service, industrial and agriculture sectors. The service sector already accounts for more than 75% of the labor force in the US and UK, with the industrial sector being around 20% and agriculture in low single digits. In other developed countries like Japan, Germany and France, services are more than two thirds of the labor force, and in Brazil, Russia and South Korea they are well over fifty percent. While huge progress has been made in the productivity of the industrial and agricultural sectors, the service sector has lagged far behind.