Guest blogger Bill Kramer is principal of The Global Challenge Network, LLC, an executive education and training company. From 2001 through mid-2007, he worked on pro-poor business strategies with WRI. Previously, Bill founded a non-profit focusing on the relationship of knowledge to economic development and enjoyed a long career in the private sector, founding a dozen companies, most of which were in the book business.

By Bill Kramer

Intel and the OLPC project have parted ways. The proximate cause, according to the report in The New York Times on Saturday, January 5, was the effort by an Intel salesperson in Peru to get the Education Ministry to switch from the XO to Intel's Classmate PC for primary schools. This was interference with an existing contract for the XO and contravening prior Intel agreements not to compete directly, nor to disparage the XO through one-on-one comparison of the machines. David Kirkpatrick from Fortune has an in-depth interview with OLPC head Nick Negroponte that goes into even more detail.

The failure of this partnership is not surprising to most observers, however disappointing it may be. First, Intel, as readers of Next Billion will know, was resistant to joining the OLPC effort, but yielded last year, and agreed to cooperate in developing a new chipset and machine, the Intel XO, which was to be unveiled at the Consumer Electronics Show which opened this past weekend (also see this story on the CES’ greening initiative). It was going to be a rough ride for the partners. OLPC and Intel already had a history, strong personalities at their respective centers, and, on OLPC's side, a powerful vision driven by education, not commerce, as Nick Negoponte said loud and often.

These divergent visions are the second reason for this breakup. In Intel's statement on its departure from OLPC, Chuck Mulloy of Intel said, in part, "that at the core of this is a philosophical impasse about how the market gets served." Spot on, in my view. And my sympathies frankly lie with Intel on this particular issue (while, at the same time, the press report suggests that Intel behaved badly in other respects here).

My earlier posts on the OLPC suggested that the philanthropic/education orientation of the venture would prove shaky in the competitive environment of computer hardware, and that reliance on governments as the primary market could prove a flawed approach to commercial success. Prof. Negroponte has remarked ruefully that politician's headline-seeking public "contracts" with OLPC have, in a number of cases, not been followed by checks being written. More experienced (and perhaps cynical) businesspeople could have (and may well have) foretold this outcome.

Third, while I am not privy to Intel's decision-making process, or thinking on the OLPC partnership, it may have been driven more by external factors (perception of non-cooperation, brand-consciousness, corporate "social" responsibility) than internal drivers (belief in the objective, alignment of products) and more from the top (Intel's Board Chair, Craig Barrett, is chair of the UN's Global Alliance for ICTs and Development) than from the operating divisions, where the actual work of partnership would have to be done. Certainly the press reports indicate a deep chasm between executive interests (keeping the partnership alive) and the sales guys. At the end of the day, the executive office couldn't (or didn't) get the sales and marketing folks to get with the program. To someone like me, with a background in business, this is not shocking – actually, it happens every day.

What are the likely outcomes of this split? In the short run, it's a black eye for both. It will be hard to explain away, and the particulars may cause ill-will in various quarters. In the long term, probably not disastrous. I've always felt that the principal benefits of the OLPC and Classmate PC efforts, and others like them, will be the technological breakthroughs that come from the cost-reduction race. Those should be unaffected, and, perhaps even accelerated, if Intel and OLPC seek, as pure competitors now, to "out-tech" the other.

Side note: The NYT report says that Negroponte was particularly outraged by the head-to-head comparison in Peru, and I expect that his anger is in part fueled his recognition that OLPC may not look great in such a competition. While the argument may be that they are not intended to be comparable, well, that's what markets and customers end up doing, making comparisons of features, costs, and value for specific purposes.

Finally, perhaps this bruising event will allow, in time, both sides -- the mission-driven and the profit-driven -- to reassess what constitutes a productive partnership. I think it will shake out that the mission guys will, and should, concentrate on underlying technologies (inside the machine and networking) and content and applications, while the profit guys will, and should, continue to focus on market-building, designing the right consumer packages, and delivering them to the market. The two sides are not fundamentally in opposing camps; they can, and will, find ways to make the markets work for the poor.