OLPC Product Roadmap to Financial Independence

   
   
   
   
   

Looking at the One Laptop Per Child product roadmap slide that Digitimes captured at Mary Lou Jepsen's keynote presentation at the International Display Manufacturing Conference (IDMC) on July 4th, I was struck by a vision on independence.

Just look at the slide - do you see the same vision that I do? A vision of OLPC financial independence!

olpc products

Do you see the One Laptop Per Child Foundation shifting the $30 Billion dollar cost burden from participating countries, all of them financially challenged beyond the capacity to buy one computer per child, to those who lust after its technology and want it as commercial products?

We can always start with a commercial version of the OLPC itself, as many of us already have, in our dreams. An XO stepped up to adult computing needs, but sill not the bloatware of a Wintel set-up, priced per the slide at $1,000, but built using the XO cost methods. Right there, OLPC could rack up per-computer profits to buy a whole country's worth of Children's Machines.

Now let's go off-slide to a calculation sent to be my Winter. He wondered what is the value of just the patented XO screen design which Jepsen gave to MIT. To quote him:

Reports estimate the cost savings from Mary Lou Jepsen's design at $50 per screen. Could be more, could be less. But the new design can be build with existing production lines which helps rapid adoption.

World-wide, around 50 million screens are produced annually. Together, this means that the potential savings (~ value) of the new design is around $2.5 Billion a year. It is a completely different question whether the OLPC can monetize this value, but the value seems to be there.

True enough, Winter, but think of all the cell phone screens or ATM terminal screens which could now be readable in direct sunlight or at night, and you start to see some serious cash flow.

Now, I'll leave it up to the ever-resourceful OLPC News readership to think-out the profit angles for all the other devices that Jepsen lists, profit that can be used by the non-profit OLPC to fun one laptop for any country's children they see fit, the ultimate alternaternate laptop financing option.

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Look at this step in the direction of technology commercialization - OLPC WiFi is now FCC approved according to Engadget: http://www.engadget.com/2007/07/10/olpc-radios-get-fcc-approval/

That means the little bubble on the slide above that says "active antennas" and wifi "repeaters" can now be shifted to 2007, from 2008. Or another way to look at it could be that $176 million in royalties granted to Quanta to produce antennas for other notebook sellers could pay for the first batch of OLPC XO's

Looks like a roadmap to project-suicide.

Put yourself in the shoes of someone in a cash-strapped country, trying to convince your government to buy into the OLPC project. This roadmap does them no favors. A skeptical government minister might look at this roadmap, and see that in 2 years they can get a better product for less than half as much money. Better to wait a couple years, rather than buy into OLPC now.

The $50 OLPC on the roadmap in 2 years will in reality turn into a $120 OLPC after perhaps 3 years (engineers and idealists are always over-optimistic). In the meantime, the OLPC project will find it hard to sell to governments who would rather wait a bit for the better/cheaper product later.

This could kill the OLPC project. Better to under-promise and over-deliver.

I agree that it will kill OLPC as originally proclaimed. At best OLPC will license the screen and some of the hardware for laptop production - the technology will get out one way or the other because it's so valuable.

Nonprofits in the US can collect license fees without paying taxes on the income, so a generous cash flow will be guaranteed to Nick and his inner circle. Contrary to popular opinion, running a nonprofit can be lucrative.

I have been a proponent of nonprofit research ever since my employer, Interval Research, was closed summarily for lack of income. The horizon for showing income on research is a lot farther out than for-profit business generally permits, and the permitted horizon is shrinking all the time.

Whether any of this translates to laptops for kids is an open question. And speaking of "open", don't be surprised if a body of software develops that is not "open source" in the way we currently understand it. There will be the open source base, but extra attention will be paid to software developed for license, and to the support of such software.

I believe that Nick's vision of compulsory laptops for all children in developing countries will never be realized. Much more likely the commercial market, having been forced into action by Nick's nonprofit "happening", will grudgingly bring forth a new, low-cost tier of laptops and similar equipment (servers, wireless repeaters, power sources, etc.) which will work for the kind of functions that OLPC was supposed to create by command, though through a market economy.

Technologically, OLPC has performed a service in creating the situation that unleashed the creative energies of a large number of developers and kept them coordinated. It should serve as a model to study when considering the future of product research and development. The companies that donated (invested) money for the project will probably realize a significant return, though it will be hard to quantify it.

But don't expect the original promises to be made good on. In a way, the outcome might be even better.

@Lee

The target (I hope) is educating impoverished children with the help of this remarkable hardware. Commercialization does not prevent that from happening. It's also not a given that every country on the planet is going to wait for the volume to go up and the price to go down.

I think all of you miss my main point in this post. Ignore the $50 price point and focus on the products.

By selling XO technology to consumers in various forms, OLPC can pay for laptop construction and distribution all by itself, no purchasing minister needed. Of all the craziness to come out of OLPC in the last year, this product roadmap is finally a sign of sanity.

We knew from the start that the millions of dollars required to go one laptop per child was funny math in the harsh light of governmental budget reality, and that a "$100 laptop" was pure marketing fluff. Here now we have a logic-based way to get OLPC off the ground and scaling at the size Negroponte hopes: royalty revenue.

I for one, truly hope that Jepsen's slide becomes a commercial success.

The technology is great, and given a large volume of shipments, the underlying costs will come down, and the bugs (in both hardware and software) will get worked out.

If the volume never appears, the entire project could die. Costs will not come down - and worse - the bugs will not get worked out of the hardware and software (and there will be bugs). Commercial uptake of somewhat-buggy technology will be slow, or even fail.

The roadmap shown represents very poor judgment. The $50 bubble should be off at 2015 or later - long enough so potential customers buy now rather than wait. The price point is optimistic (at least) for just two years out, and if not met will be viewed as another failure of the OLPC project. How many years can the OLPC project continue to run without volume shipments? If buyers choose to wait, OLPC money might get thin.

Volume is the key. Kill the volume and you have trouble.

Wayan, I assume you have seen this, but if not: Intel just joined the OLPC board.

"Wayan, I assume you have seen this, but if not: Intel just joined the OLPC board."

Is this "if you can't beat them, join them"?

A week or so ago, I would not know who was "beaten". But given that an ex-intel developer has given the OLPC a design that most likely make the OLPC financially independend, I suspect it is Intel that decided to throw in the towel.

And the OLPC has never said they wanted to monopolize education. I think they will be happy to let others sell machines to, if these other do not try to destroy the market.

Winter

Winter (oh, eternal optimist!):

One does not "throw in the towel" by taking seats on the competition's board, regardless of what an "ex-Intel developer" says or does. Usually, for such an outcome, there is a quid pro quo in the form of money or a commitment of resources toward outcomes favorable to the company whose board you are joining.

In the for-profit corporate world, this is called investment. In OLPC's nonprofit world, it would be called something else, but what that is I am not prepared to guess. It wouldn't simply be the commitment by OLPC to use Intel chips - that would be a gift to Intel, not the other way around.

OLPC desperately needs Intel to get out of the way of their making sales. If that is all it is, then perhaps Intel is justified in asking for board representation, but I feel that they will want to exercise the power that goes with the board seats, which will have some effect upon OLPC's plans - probably to get them to conform better with Intel's plans.

There are many more steps left to go in this game, and they will be taking place out of sight. We shall all be watchng the Kremlin (in a sense) for clues.

"OLPC desperately needs Intel to get out of the way of their making sales. If that is all it is, then perhaps Intel is justified in asking for board representation, but I feel that they will want to exercise the power that goes with the board seats, which will have some effect upon OLPC's plans - probably to get them to conform better with Intel's plans."

The point was, that Intel was very much opposed to the OLPC. They fought it tooth and nail from the start. They have even spend a lot of time and money trying to destroy any market for XOs.

The were soo much oposed, they reserve $1B to push their own solution. I have seen no credible story about intel being able to compete on cost with the OLPC. So it seems that if intel was to "win" it could cost them the full $1B. Probably more than they would be able to earn in the next 5-10 years from this market.

My point was not so much optimism but logic.

If Wayan was right, and the OLPC has become financially independend, then Intel could face a double loss. First by not being able to drive the XO from the market by undercuting them in (subsidized) sales. Second, by not being able to get their hands on the new screen technology. (imagine the OLPC preferably selling their technology to AMD powered devices).

By taking a seat on the board, Intel commits themselves to the OLPC. If this means intel will be able to produce XO-like laptops, why would the OLPC "care". As the OLPC always say, this is about education, not laptops. And Intel sells more chips than just processors.

But this all rests on the assumption that the OLPC can manage a sizeable income without sales. If this is not true, then I too think it is a sign of defeat of the OLPC. (I still think the Classmates would be a disaster for schools, in cost, maintenance, and security)

I do wonder how AMD and Intel will manage together on the same board? And whether this also means that MS will get a foot between the door as Intel will most likely produce laptops that also run XP cripled?

Winter

This is the take of The Register on Intel joining the OLPC

http://www.theregister.co.uk/2007/07/13/intel_joins_olpc/

They think Negroponte "browbeated" Intel into joining.

On the other hand, I do not see what technological edge of the Classmate over the XO they are refering too.

Winter

Wayan,

"By selling XO technology to consumers in various forms, OLPC can pay for laptop construction and distribution all by itself, no purchasing minister needed."

"Here now we have a logic-based way to get OLPC off the ground and scaling at the size Negroponte hopes: royalty revenue."

The problem is, if I real the chart correctly, there won't be any royalty income until late 2008, but the launch is a year earlier. Maybe Quanta will go ahead in anticipation of major success later on?

Eduardo,

OLPC could easily license core aspects of its technology for financial gain today, gain that could be used to jump-start the production lines, no matter the developing world payments. But it doesn't seem to be willing/able to do this - ChiMei has the screen rights, apparently for free/little, Marvell owns the mesh, and Red Hat already took the Open Source power management code.

The problem with announcing that the XO will cost $50 in 2009 is, why should any poor country pay $175 now? Either the price will be $50 in 2009 or the project will flop. In either case waiting is more prudent.

What the 14 people of the OLPC have produced in two years is astonishing and has stood the computing world on its head. But in financing the project, how do you get from $175 now to $50 to 2009?

In the economic world, marketing is at least half the game. The insatiable desire of "first adopters" for new products is exploited by all to rake in the dough. To get the production cycle launched you need to sell millions of red XO's at $300 to the FA. Then a few million more at $250 to rich school districts with $8,000 per pupil school budgets for whom that is pocket change.

In the meantime you pursue your original goal of providing for the poorest by selling green XO's now at $50, not in 2009, so the education minister do not have to hedge their bets. The original 14 people are not equipped to do the finance and marketing. You need another 14 equally bright business types to get the ball rolling.

If because of volume the price in 2009 does indeed fall to $50, Nick Negroponte's original dream can roll on its own.

If computer buyers looked at the history of computer price/performance, they would "never" buy a computer. Not until the moment they need it. They always get more powerful and cheaper, every year. Hundreds of thousands of idiots lined up for expensive iPhones when they know damn well that better models will cost literally half as much next year (without the overpriced lock-in calling plan).

Luckily, the early OLPC countries know that it's worth spending today's price to educate their kids better today. Not only that, but more kids come along every year. The 2009 $50 laptops will be designed to meet the EARLY COUNTRIES' actual needs -- because they will know their actual needs after living through two years of kids using the current generation. The late arrivals will have to make do with a product customized for the high volume early arrivals.

Is Toshiba's Portégé R500 the first OLPC product commercially available? The notebook to use transflective LED backlight technology similar to the XO laptop...

http://news.zdnet.co.uk/hardware/0,1000000091,39288419,00.htm

Will Puppy Linux, http://www.PuppyLinux.com , run on the OLPC Version 2? It seems this would be very well suited for travelers as well as school kids. Is there a way we could test an OLPC Version 2 before 2010?

Thanks,

http://www.Linux-Now.us

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