One Laptop Per Child: A Big Flop?

♠ Posted by Emmanuel in ,, at 11/26/2007 01:11:00 AM

Let me admit at the outset that I thought the much-ballyhooed One Laptop Per Child (OLPC) project by digital visionary Nicholas Negroponte made a pretty solid case: a rugged, energy-efficient unit which could be used where Wintel (PCs running Windows operating systems and Intel processors) machines dared not go. Remember, the OLPC uses Linux for its operating system and has an AMD processor. What I didn't count on were efforts from Microsoft and Intel to undermine OLPC. After all, the OLPC is a non-profit project. As you will read in the Wall Street Journal article below, however, Microsoft has been lowballing Windows and Office at a price of $3 in a number of developing countries. Also, Intel, which previously was more of a parts supplier than a computer seller, decided to sell its Classmate low-cost Wintel machine. Both of these efforts have helped derail OLPC. The reasoning goes, "Why not just buy a 'real' (read: Wintel) machine instead of a 'toy?'"

In addition, there have been several computer manufacturers selling Wintel machines near the OLPC's current $188 level. (Aside from the WSJ clip above, there is a more self-promotional clip on OLPC from YouTube.) Did Microsoft and Intel really fear the OLPC and respond in a less-than-friendly manner? I really can't say right now. As Negroponte concedes, there may be a silver lining if more affordable PCs are made available by the actions of Wintel and others in reaction to the OLPC initiative. To paraphrase Deng Xiaoping, "It matters not whether the computer is green or black as long as it reaches students in the developing world." For that we may thank Nicholas Negroponte, whatever the fate of the OLPC project:
In 2005, Nicholas Negroponte unveiled an idea for bridging the technology divide between rich nations and the developing world. It was captivating in its utter simplicity: design a $100 laptop and, within four years, get it into the hands of up to 150 million of the world's poorest schoolchildren.

World leaders and corporate benefactors jumped in to support the nonprofit project, called One Laptop Per Child. Mr. Negroponte, a professor on leave from the Massachusetts Institute of Technology, hopscotched the world collecting pledges from developing nations to buy the laptops in bulk.

But nearly three years later, only about 2,000 students in pilot programs have received computers from the One Laptop project. An order from Uruguay for 100,000 machines appears to be the only solid deal to date with a country, although Mr. Negroponte says he's on the verge of sealing an order from Peru for 250,000. The first mass-production run, which began this month in China, is for 300,000 laptops, tens of thousands of which are slated to go to U.S. consumers. Mr. Negroponte's goal of 150 million users by the end of 2008 looks unattainable.

Mr. Negroponte's ambitious plan has been derailed, in part, by the power of his idea. For-profit companies threatened by the projected $100 price tag set off at a sprint to develop their own dirt-cheap machines, plunging Mr. Negroponte into unexpected competition against well-known brands such as Intel Corp. and Microsoft Corp.'s Windows operating system.

A version of Mr. Negroponte's vision is starting to come true. Impoverished countries are indeed snapping up cheap laptops for their schoolchildren -- just not anywhere near as many of his as he expected. They now have several cut-price models to choose from, raising the possibility that One Laptop Per Child, or OLPC, will end up as a niche player.

"I'm not good at selling laptops," Mr. Negroponte has told colleagues. "I'm good at selling ideas."

"From my point of view, if the world were to have 30 million" laptops made by competitors "in the hands of children at the end of next year, that to me would be a great success," he said in a recent interview. "My goal is not selling laptops. OLPC is not in the laptop business. It's in the education business."

From its inception, One Laptop Per Child posed a threat to the personal-computing dominance of software giant Microsoft and chip maker Intel. Mr. Negroponte's team, drawn from MIT, designed a machine that didn't use Windows or Intel chips. It uses the Linux operating system and other nonproprietary, open-source software, which users are allowed to tinker with.

Last year, Intel, which normally doesn't sell computers, introduced a small laptop for developing countries called the Classmate, which currently goes for between $230 and $300. It has marketed the computer aggressively, although it stands to make little money on the initiative. But it hopes to prevent rival Advanced Micro Devices Inc., or AMD, whose chips are in Mr. Negroponte's competing computer, from becoming a standard in the developing world.

By most accounts, Mr. Negroponte and his 20-member team have created a rugged, innovative laptop with good software for learning. The small green-and-white device is designed to operate on very little power -- a small solar panel can keep it going -- and to resist rain and dust. Its unique, high-resolution screen stays bright even in direct sunlight. The laptop has a built-in video camera and connects wirelessly to the Internet and to other laptops of its kind.

But the project has hit snags. The $100 price target is proving difficult to hit, although Mr. Negroponte's team has succeeded in creating a device that's cheaper than other laptops. It now sells for $188, plus shipping. Potential buyers in the developing world have expressed concern about the availability of training for schoolteachers, and after-sales support. Mr. Negroponte's plan is for the machines to be simple enough that students can train themselves -- and solve any glitches that arise...

The One Laptop initiative is facing competition from Taiwanese, Indian and Israeli sellers of inexpensive Windows laptops, who see the developing world's more than one billion potential young customers as a big opportunity.

Intel, based in Santa Clara, Calif., so far has proven the biggest competitive threat. The introduction of the low-cost Classmate sparked accusations by Mr. Negroponte that Intel was trying to undermine his nonprofit initiative. Intel made a multimillion-dollar contribution to the One Laptop project and joined its board in July.

Nevertheless, Intel has continued to compete with the nonprofit, and it appears to be winning. It recently inked deals to sell hundreds of thousands of Classmates in Nigeria, Libya and Pakistan -- countries that Mr. Negroponte had been counting on. Intel has launched a series of pilot projects in those countries, and has said it will test the Classmate in at least 22 other nations, donating thousands of machines.

In recent months, Mr. Negroponte has abandoned his initial strategy of trying to persuade a half-dozen developing countries -- Argentina, Brazil, Libya, Nigeria, Pakistan and Thailand -- to buy one million laptops each. The project has begun accepting much smaller orders, and is attempting to persuade wealthier countries, including Italy and Spain, to finance laptops for poorer ones.

As sales problems mounted, the project recently reversed course on its plan not to sell the device to American consumers. On Nov. 12, it began selling pairs of laptops to U.S. and Canadian buyers for $399. Under the program -- called "Give One. Get One." -- one goes to a student in a poor country like Haiti, the other to the buyer. The program was supposed to last just two weeks, but on Thursday One Laptop said it was extending the offer through Dec. 31 because "people want more time to participate." Mr. Negroponte says there were about 45,000 two-laptop orders in the first nine days, with nearly half coming on the first day...

He seems most frustrated with Intel, whose overseas sales force has trumpeted the Classmate over his laptop in Nigeria and Mongolia, using marketing materials that claim the Intel machine is superior. "These are not isolated examples," he said in a recent interview. "They are daily events..."

Publicly, Intel and Microsoft officials didn't hide their disdain for Mr. Negroponte's machine. In December 2005, Intel Chairman Craig R. Barrett called an early version a "$100 gadget" that wasn't likely to succeed. At a conference in March 2006, Microsoft Chairman Bill Gates said: "Geez, get a decent computer where you can actually read the text and you're not sitting there cranking the thing while you're trying to type."

This year, Mr. Gates announced in China that Microsoft would offer developing countries a $3 software package that includes Windows, a student version of Microsoft Office and educational programs. Mr. Negroponte said the move was a direct response to his project. James Utzschneider, general manager of Microsoft's Unlimited Potential Group, a unit whose targets include young people in developing countries, denies this.

Libya and Egypt plan to buy the $3 software, Mr. Utzschneider says. Mr. Negroponte had hoped to sell his Linux-based laptops to both countries. Mr. Utzschneider says an organization in Russia has signed an agreement to buy at least 200,000 copies, with an option to buy up to 800,000 more. The Russians, he says, initially will load the software onto a low-cost laptop made by Asustek Computer Inc. of Taiwan, another One Laptop competitor.