The One Laptop Per Child (OLPC) project, which produces low-cost education laptops to sell to governments in developing countries, is facing some major financial challenges. The group recently downsized half of its staff in an effort to reorganize and increase operating efficiency. Project founder Nicholas Negroponte revealed on Thursday that the move was partly necessitated by the failure of OLPC’s Give 1 Get 1 (G1G1) initiative. He has also shed some light on a new strategy that could help the organization make a turnaround.
OLPC first launched the G1G1 initiative in 2007 in response to slow government sales. Negroponte acknowledged that governments were reluctant to buy XO laptops in bulk and that a new strategy had to be adopted in order to make the project sustainable. The G1G1 program allowed consumers in North America to obtain an XO laptop by paying for two units. The buyer receives one and a student in a developing country receives the other. They launched the initiative right before the holiday shopping season, but they seriously botched the execution.
An abject failure
OLPC decided to try the G1G1 program a second time in 2008, but with better planning and a much more reliable order fulfillment strategy. It wisely decided to partner with Internet retailer Amazon.com rather than attempting to manage the orders and shipments itself. Despite better planning and a much bigger investment in advertising, the 2008 G1G1 program was an abject failure. The first G1G1 attempt generated $37 million despite the canceled orders and other problems. The 2008 G1G1 program only generated $2.5 million.
Competition from the latest netbook products probably contributed to the significant decline in G1G1 sales. It’s also possible that the problems from the 2007 G1G1 program alienated some potential buyers. In a recent interview, Negroponte told Xconomy that the economic downturn is the primary reason why people aren’t opening up their wallets for G1G1. He says that the current financial climate has also frozen up the flow of cash from OLPC’s biggest corporate sponsors.
OLPC’s operating costs were running at over $1 million per month, Negroponte says. The lack of revenue from G1G1 and the sudden decline in corporate sponsorship completely devastated OLPC’s sustainability. In order to compensate for lower resources, the organization was forced to cut half of its staff. It has now reduced its monthly operating costs to less than half of the previous amount. The organization claims that its new, slimmer configuration will allow it to move forward and that it has enough cash in hand to keep itself operating for at least one more year.
Getting OLPC v2.0 to market
A big question that remained unanswered when Negroponte first announced the layoffs is how the organization plans to get its 2.0 product to market. Negroponte has brought some clarity to this matter by revealing that OLPC will not be manufacturing or distributing its next-generation product. The organization will build a reference design and encourage partners to manufacture and deploy it commercially. OLPC also wants to hand off support and deployment tasks to independent branches that operate in each region.
OLPC’s new approach is very similar to the strategy behind Intel’s competing Classmate PC concept. The Classmate PC is a reference design created by Intel that hardware manufacturers can use to build their own low-cost laptops. Several countries have already announced plans to adopt the Classmate PC. The government of Portugal, for example, recently committed to building 500,000 units. According to Intel, over a million devices based on the Classmate PC reference design have already been shipped. This exceeds the 800,000 units that have been shipped by OLPC.
OLPC president Charles Kane has also provided some insight into the project’s new software strategy. He says that OLPC no longer has the resources to contribute to continuing the development of the XO’s Linux-based Sugar environment, which is now maintained by the open source software community through a separate spin-off organization. He says that the learning model associated with Sugar is still an important part of OLPC’s vision, however, and he believes that porting the environment to the Windows operating system would be beneficial to the OLPC project—a position that has generated significant controversy within the organization.
The new strategy looks promising, but it may have arrived too late to save the struggling organization. After so many setbacks and logistical failures, the project has lost a lot of momentum. Negroponte, however, still believes that they can make a difference and bring their next-generation product to the market.
Listing image by OLPC
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