THE BLOG
03/18/2010 05:12 am ET | Updated May 25, 2011

The Market for Humanitarianism

It is David vs. Goliath. It is corporate America vs. small business. It is the ongoing struggle between One Laptop Per Child (OLPC) and Intel.

MIT professor Nicholas Negroponte founded OLPC, a non-profit organization, in the hope of expanding educational opportunities through the spread of personal computers to children in the world's poorest countries. Running operations from their small MIT headquarters, OLPC managed to create a cheap, durable, and effective computer in the XO-1.

The goal was to distribute this computer to as many underprivileged children in the world as possible. Initially, the product proved to be a global success as orders were placed from Uruguay to Ghana. Yet seizing on OLPC success and this perceivably untapped market for sales, Intel introduced their own netbook. Intel's Classmate has become OLPC's largest competitor in poorer countries and now can be considered the industry leader.

Anyone examining the OLPC computer would have to be pretty impressed. For a mere $188, the computer proves ideal in meeting the needs of poorer children living in the world's most rugged regions. The technology's designers built the XO-1 with this difficult and complex environment in mind. The XO-1 is immune to water, dust, and drops. Additionally, the computer is equipped with a solar panel to recharge the battery. Yet, it is what is on the XO-1 that makes it an optimal computer for children.

The computer has a wireless connection to the Internet, which provides students with instant access to knowledge to a previously unimaginable extent. The XO-1 also has a built in camera for enabling communication among students from countries and continents around the world. Finally, the product provides students with the means to read books on the computer. The OLPC can hold thousands of books that in conjunction with teachers' efforts can be used to expand the educational curriculum of students.

With such enamoring features, the product appeared to be a perfect fit for students in poorer countries for enhancing the education of their young ones. After its release early in 2006, sales for the laptop soared. In 2007 and in early 2008, orders for the XO-1 came from Uruguay, Peru, Rwanda, Ethiopia, Mongolia, Afghanistan, and Cambodia. However, OLPC success was halted with the introduction of the Intel Classmate PC to the world market.

Intel produced their own version of the netbook and began aggressively competing with OLPC in all competitive markets. Recently, Intel has completed deals with Nigeria, Libya, and Pakistan, Brazil, and Mexico; all countries OLPC was heavily invested in. Many of these countries' governments that opted for the Classmate cited their desire to deal with a name brand like Intel as opposed to the smaller entity in OLPC.

The competition between the two companies can politely be characterized as intense. Intel executes a strong marketing effort not only in countries that OLPC is campaigning in, but also in countries that have signed agreements with OLPC. As a result, many OLPC projects have been delayed or negated. In 2007, Libya reneged on earlier deal with OLPC to purchase 1.2 million computers and instead opted to purchase a pilot program of 150,000 Classmates. In addition, there were numerous instances where Intel would engage in predatory pricing. While the Classmate is more expensive, Intel would be involved in aggressive pricing up front that would not hold in the long run. This tactic would allow Intel to hold an advantage over the Cambridge firm and thus seize a particular market.

While the two products remain rivals in an ever-expanding market, Intel and OLPC have not always been weary of one another. In 2007, Intel joined the OLPC board in the hopes of collaborating to distribute computers to the world's poorest children. Both parties promised not to criticize the others product. However, tensions resumed as OLPC discovered Intel's continued effort to derail OLPC. Intel resigned from OLPC in 2008 and cited their desire to expand their marketing of the Classmate. The President of OLPC Chuck Kane summarized the situation, "The two entities could not work together. Intel was more driven by sales, and in this market it is hard to control sales. On the other hand, OLPC was not receiving the development help that it wanted from Intel. As a result, the deal fell through."

Who cares who makes the computers as long as everyone gets one? Mr. Kane could not agree more, but he cautions, "it matters only if they [children] are getting the computer that will not break down." There have been many head-to-head matchups between the Classmate and the OLPC. However, the Cambridge based company confidently notes how their computer is simply a better fit for its objective. Where the OLPC is rugged and less expensive, the Classmate simply is not. The price of the Classmate is 35% higher that that of the OLPC. In addition, the Classmate uses a processor chip that requires a fan to prevent the product from overheating. As a result, the Classmate uses significantly more amounts of energy than the OLPC in terms of running the machine. Finally, the fan also provides an opening for dust or moisture that could destroy the machine relatively quickly. Mr. Kane simply notes, "in a developing world the machine would not last."

OLPC is not by any means going quietly into the night in the face of stiff competition. The company just completed the distribution of the XO-1 to 415,000 elementary schools in Uruguay. In addition, OLPC recently inked deals with Rwanda for 120,000 computers and Peru for 294,000 computers. In just three short years, OLPC has managed to sell over a million computers to some 31 countries. Mr. Kane proudly notes, "Indeed if a company would build a netbook that would have our qualities of low power and ruggedness, We would love to be out of the hardware business. We would love to have someone providing that machine at the right price point." Yet it remains obvious to Mr. Kane and his company, the OLPC remains the only product suitable for meeting the needs of early childhood education.