An action executes in runtime on the same tier (client or server) as its parent process.
This means it is executed on the client if it is inside a display element (or inside another action that is inside a display element), but if it is inside a service, it is executed on the server.
A service, on the other hand, is always executed on the server.
Example 1 - 'Action' inside 'Button': Will execute on the client.
Example 2 - 'Service' inside 'Button': Will execute on the server.
Example 3 - 'Find' inside 'Button': Will execute on the server (as a database access process, 'Find' is inherently a service).
Example 4 - 'Action' inside Service' inside 'Button': Will execute on the server (its parent is a service).
What we lack at the moment is a clear indication for a palette template that it is a service. You know for sure wehn you use 'Basic/Service' and database services, but not in other cases.
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