Lifecycle Costs

"It is a capital mistake to theorize before one has data. Insensibly one begins to twist facts to suit theories, instead of theories to suit facts."--Sherlock Holmes, in A Scandal in Bohemia, by Sir Arthur Conan Doyle

Data

EMPA at the Swiss National Labs is continuing its work on life cycle analysis of the XO laptops by comparing the cost, lifetime, power consumption, and overall environmental impact with the refurbished desktops in Columbia. Mary Lou [Jepson] teleconferenced with the team this week [2007-12-22] and will assure that they get all the data they need to complete their analysis. The final report is due in mid-February. Columbia is widely acknowledged to have one of the most successful re-furbished desktop programs in Latin America.

Complaint

An article at OLPCNews on November 13, 2006 claimed lifetime costs for an XO at nearly $1,000. Here are the numbers cited, with comments by Mokurai 20:15, 28 December 2007 (EST)

The Bill
PER LAPTOP INVOICE, 5 YEARS

Setup
Initial Hardware    $148.00                     <--Low. Currently $189, plus a share of gang chargers and solar or other power.
Setup (1-time fee)  $108.00                     <--Absurdly high. 
Total Setup                   $256.00

Training
Yearly              $ 27.60                     <--Is this in addition to existing training costs?
Total Training                $138.00           <--If not, remove it.

Maintenance
Yearly              $  7.40                     <--Assumes only so-so reliability, and outside service.
Total Maintenance             $ 37.00           <--The XO was designed to be repaired by schoolchildren,
                                                <--and is extremely rugged. 
Internet
First Year $1                 $  1.00
Yearly              $135.00                     <--Per XO? $13,500 per school server (for 100 children with XOs)?
Total Internet                $541.00           <--Well, for current satellite Internet in parts of Africa, OK.
                                                <--But for most locations, this is nonsense.
5 Year Total                     $972.00

These estimates take no account of savings on printed textbooks. Costs must always be balanced against benefits. Will schoolchildren with XOs, or the businesses they start, pay an extra $1,000 in taxes (lifetime contributions, Net Present Value discounted by the higher cost of borrowing for developing countries)? Will lives be saved, societies strengthened, ecologies restored or preserved because of these educational opportunities? What is that worth?

It is important to look at lifecycle costs both from the profit point of view and the cash flow point of view. Both must be positive in order for a project to proceed. If a project promises to be profitable, but with a period of negative cash flow, it is always appropriate to calculate whether available financing options can maintain a positive cash balance without cutting too much into profit.