Year End - OLPC struggles to realize ambitious vision

OLPC has struggled to realize its vision of giving US$100 laptops to kids in developing countries, plagued with distribution, supply and localization issues.

Greeted with fanfare and kudos when its prototype PC was shown off by Nicholas Negroponte and United Nations Secretary-General Kofi Annan more than two years ago at the World Symposium on the Information Society in Tunis, the One Laptop Per Child project is now beset by waning orders and competition from commercial vendors that threaten to sideline the nonprofit effort.

While Intel is successfully selling its Classmate PC to governments and educators in the developing world, OLPC's distribution and support model are not appropriate for a venture of this kind, critics said. Both have led to its stumbling, as its target customers, governments, reduce orders or withdraw from commitments to order the laptops.

"OLPC has no marketing leverage or muscle to put enough talent on the ground, country by country, to bring in orders, or to provide service and support. At this stage, it's somewhat difficult to anticipate OLPC will prove to be a wonderful catalyst to a wonderful idea," said John Quelch, senior associate dean and professor of business administration at Harvard Business School.

The lofty concept of Negroponte, OLPC's founder and chairman, to give a US$100 laptop to kids in developing countries has suffered partly because of the organization's inability to connect with specific governmental and educational needs. Without the volume orders it had hoped for, economies of scale in manufacturing have been elusive.

In 2005, before showing the computer in Tunis, Negroponte said, "I've told the governments that our price will float and go down over time," adding that "US$100 is still too expensive." But by the time the laptop reached production in November, its price had jumped from US$100 to US$200.

Negroponte had initially hoped that mass production in quantities of 5 million to 15 million would begin about a year ago, and that by the end of 2007, 100 million to 150 million laptops would be produced. However, current plans call for production of only about 300,000 laptops this year, reaching 1 million by the end of next year.

The production delays and rising costs have resulted in governments and educators either withdrawing or reviewing original commitments to order XO laptops. Carlos Slim Helu, a billionaire in Mexico who pledged to purchase 250,000 XOs, reduced his order to 50,000. Thailand and Brazil, which expressed interest as early adopters of XOs, have backed away. Argentina, which committed to 1 million XOs in 2006, hasn't officially placed its order yet, according to OLPC's wiki.

The numbers are significantly lower than the one-million-unit minimum that Negroponte, in 2005, called the "entry ticket" for governments wishing to participate in the program.

Nigeria, which last year committed to buying 1 million XOs for US$100 each, is now reviewing the order with OLPC, said Tomi Davies, who supplies XO laptops to Nigeria's primary schools. "I understand this commitment is currently under review by the Federal Government of Nigeria due to the price change and potential conflict in educational priorities," Davies wrote in an e-mail.

Intel PCs loaded with Windows are preferable to open-source XO laptops, as familiarity with the Windows platform helps secondary-school students join the workforce earlier, which benefits the country's economy, Davies said. XO laptops are part of a pilot test at a government-run primary school in Abuja, Nigeria.

Intel also bested OLPC in Libya, with the country withdrawing its order of 1.2 million XO laptops, opting for Intel's classroom PC instead. Intel has already inked deals to supply Classmate PC laptops in Pakistan, Mexico and Brazil. OLPC has substantial orders only from Uruguay and Peru.

Earlier this year, Negroponte publicly said that Intel's Classmate efforts hurt his project, given the well-funded nature of the chipmaker's initiative. The two organizations buried the hatchet by signing a collaboration agreement that put Intel on OLPC's board, but Intel continued to distribute its Classmate PCs through its for-profit "World Ahead" effort.

Meanwhile, as the cost of the XO have increased, companies such as Asus and Everex have developed competitive low-cost PCs, which governments may also find attractive as XO alternatives.

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