An understanding of the nature of service architecture and modularity is crucial to service design and innovation. Two sets of approaches are developed that further our understanding and support decision making. First is a systematic decomposition approach to architecture modeling that allows organizations to understand their current architecture, evaluate alternative architectures, and identify key interfaces between different parts of the service. Second, the article develops a service modularity function (SMF), a mathematical model indicating the degree of modularity deriving from unique services and the degree to which the modules can be replicated across a variety of services. Three areas are identified that can contribute to competitiveness: the possession of unique service modules or elements not easily copied in the short term by competitors; the ability to exploit these through replication across multiple services and/or multiple sites; and the presence of a degree of modularity, which in turn supports both customization and rapid new product development. The SMF can support decision making in the design of services and the exploitation of service innovation. In particular, the relationship between architecture and modularity and the roles of service contact personnel in the customization of services is shown to be complementary. It is proposed that service customization can be either combinatorial (the combination of a set of service processes and products to create a unique service) or menu driven (the selection of one or more services from a set of existing services/products to meet customer needs).