The paper adds to the literature on innovation and productivity in services in a three-fold way. First, it extends recent literature attempting to reconceptualise service output in terms of Lancasterian characteristics. Second, it models user choices in terms of the time-allocation between self-production, co-production and purchase as influenced by competences and time-saving preferences, and supplier choices as governed by opportunities to benefit from informational economies, cost saving arising from the stimulation of co-production and productivity increasing opportunities arising from the use of ICT. Third, it uses the conceptual framework to r-interpret the well-known theory of innovation in services, the Barras reverse product cycle model. Finally, the model is used to interpret UK experience with e-government service: NHS Direct and Direct-Gov.