Uruguay recently became the first country to order the One Laptop Per Child (OLPC) Foundation’s so-called US$100 Laptops, devices designed for children in developing nations. The only problem? The laptops, 100,000 of which were reportedly ordered by the nation, cost just about twice as much as the foundation originally thought they would.
The new $199 price, reported by OLPCNews.com, was not necessarily a shock. The cost of laptops sold by the organization has increased steadily since it announced its goal of making low-cost computers designed to bridge the digital gap between developed and developing nations. Earlier, the foundation revealed the price for a laptop had hit $176. For its part, the OLPC Foundation puts the current price of its computers at $188, despite Uruguay’s reported purchase at $199 each.
“The increasing cost comes as no real surprise to me. The mission of the OLPC depends on high volume to drive down costs,” Simon Yates, a Forrester Research analyst, told LinuxInsider. “The expectations for the OLPC were set too high. If the problem of driving down costs to sub-$200 was so easy, it would have been figured out long before now.
“This is a tough problem and one that won’t be solved overnight,” he added.
Great Expectations
The OLPC’s stated goal was to bridge the technological divide that exists between industrialized nations and the developing world by building an inexpensive laptop for the estimated 2 billion school-aged children in these countries. The ruggedly designed machine runs on a scant 2 watts of power, comes with a video camera, wireless Internet connectivity and a Linux-based open source operating system.
Uruguay, located in South America, purchased 100,000 of the lime green and white XO-1 laptop computers for schoolchildren at $199 each, according to OLPCNews.com. The country also has the option to purchase an additional 50,000 machines.
That order size, however, is far below the number Nicholas Negroponte, founder of OLPC, had said would be necessary for the laptops to cost $100 each. Negroponte had envisioned countries committing to buy millions of units at a time, something simply not possible for developing countries.
“The problem with the pricing issue is that the $100 laptop marketing name was a fanciful cost goal to begin with. It’s never been near $100 from the very beginning,” Wayan Vota, editor of OLPCNews.com, told LinuxInsider.
“The people in the technology industry realized that $100 was pure marketing, but most people thought, ‘Wow, $100! That’s amazing. It’s so affordable.’ But it was unrealistic,” he continued.
“There’s a big difference between a local politician shaking your hand promising to put laptops in the hands of schoolchildren in front of the press and getting that same politician to actually write a check,” Forrester’s Yates added.
Pricing Confusion
Uruguay’s reported purchase price on the laptops, as well as promotions being trumpeted by the OLPC Foundation, have led to questions and confusion surrounding the device’s price and the foundation’s different levels of participation. For example, on its Web site, OLPC offers donors an opportunity to contribute 10,000 laptops at a cost of more than $200 for each machine.
Other donations can range from $200 to deliver one laptop to a child or as much as $399 for the “Give 1 Get 1 Program.”
Contrary to the various reports on $200 prices for the laptops, the OLPC maintains that its laptops are priced at $188.
“The price is currently $188, but there can be variations by country depending on additional features requested by each country and other costs for shipping, extended warranties, currency fluctuations, etc.,” Jackie Lustig, an OLPC spokesperson, told LinuxInsider.
“Yet another point of confusion is the pricing of the ‘Give One Get One’ and ‘Give Many’ programs. Both of these programs distribute laptops through the OLPC Foundation and include both ‘fair value pricing’ and a built-in donation to help subsidize the cost of laptops to enable the foundation to reach out to children who would not otherwise be able to afford a laptop,” Lustig said.
Working Out the Kinks
In the end, the rising cost of the computers is more of a PR problem for the OLPC than a market problem, Forrester’s Yates said.
“There’s going to be lots of competition emerging over time too, and that will help drive down prices,” he stated.
It took more than a quarter century for computer technology to reach the hands of the first one billion users, Yates noted. However, with advancing technology, lower prices and global demand for a technology-aware population, it will take only seven years to reach the next billion.
“For PC technology suppliers, the biggest challenges will be scaling production with enough volume to drive down prices to meet affordability requirements and effectively planning and executing in a market that no one really understands yet,” he continued. “We will get to $100 device soon — but it may not be a laptop.”
For his part, Vota has no doubt that OLPC will figure out a model that works and eventually achieve its mission.
“The project will happen,” he concluded. “It will just be much smaller and a lot more expensive than $100 laptop and 10 million units. The reality of that is starting to sink in with everyone who heard the original marketing spiel and fell in love with it.”
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