24061: Layer references DEM image that will not be copied to server and orthorectification will not occur on server

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When publishing a raster layer by value, orthorectification will not occur on the server as the DEM image is not copied to the server.

Solution

Register the folder path containing the DEM image on the server as a data store.
Learn more about registering the data sources with ArcGIS server
Or, you can create an orthorectified raster using the Create Ortho-corrected Raster Dataset tool or by exporting your orthorectified on-the-fly raster dataset layer using the ArcMap Export Raster dialog box, found by right-clicking the raster in the Table of Contents.

Once you address the issue, click the Analyze button on the Service Editor dialog box to reanalyze the service.