Traditionally, Oracle has given customers who sign contracts worth more than $2m discounts of 60 percent to 75 percent off "retail price," analysts say. California was given a 60 percent discount to arrive at the $95m price tag, for example. Reports coming in from this fiscal year's close have cited considerably higher discounts. A Montana official said his state was offered discounts of up to 85 percent. Analysts, including Shainman, said other customers are being offered discounts as high as 90 percent -- and more frequently than in the past. Smaller contracts, too, are being offered handsome discounts. One of Shainman's clients signed a $1.2m deal and was given a 65 percent discount. A traditional "list" discount for something that small would have been closer to 25 percent, he said. Meanwhile, Oracle has approached the state of Montana with an 85 percent discount, provided the Big Sky state would be willing to renegotiate its five-year statewide licence deal now, two years before it is scheduled to end, said Tony Herbert, the state's deputy chief information officer. These discounts might actually persuade many customers to sign up by the close of business Friday, despite lingering scepticism over the California imbroglio. But that could spell bad news for Oracle's bottom line in years to come. "In the short term, this could help," said John Meyer, an analyst at research firm Giga Information Group. "In the long term, this could have a very negative impact on them." Rick Sherlund, an analyst at investment bank Goldman Sachs, agreed that there was concern that Oracle could be setting itself up for having "overcapacity," or too much software, in the market -- reducing the need for companies to make additional purchases anytime soon. "There is a confluence of events: Not only do you have a tough market, but also IBM is increasingly competing with Oracle at the high end and Microsoft at the low end," Sherlund said. "Oracle will be in a difficult position for a while. There's a concern they will burn up the market with overcapacity." Competition looms
The company's revenue has fallen for the past four quarters when compared with year-over-year figures. For the first nine months of the fiscal year, Oracle generated $6.8bn in revenue -- down from $7.6bn during the same period last year. When it closes out the current year, most analysts don't expect the company to surpass the $10.9bn in revenue it generated last fiscal year. IBM and Microsoft, meanwhile, have picked up market share, with IBM even unseating Oracle at the top of the database management software market for the first time, according to one research firm. The Toronto police department was one public agency that switched from Oracle database software to IBM in the midst of a contract meltdown between the city of Toronto and Oracle. Toronto is trying to extract itself from an $11m citywide Oracle contract, which a city auditor's report called a "serious miscalculation," as it apparently included 10 times the amount of software licences the city needed. Meanwhile, the Toronto police department has sought approval to sign a $3.9m, five-year licence for IBM's DB2 software. That decision was based on scrapping the department's existing Oracle software, because it would have had to pay $10.8m for the Oracle bid -- making the IBM offer far cheaper, even when transition costs were included, the city auditor's report noted. Although publicised instances of out-and-out switches like this remain rare, analysts are keeping an eye on whether Oracle's competitors will use the California controversy as an opportunity to swoop in and snag government business away from the company. But John Chen, chief executive of competitor Sybase, said he does not expect a surge in new business. He noted that the situation surrounding the California contract is somewhat rare -- a large, no-bid contract that was rushed forward in record time. "Doing business with the government is rather straightforward," Chen said. "So it won't likely create new opportunities for us that weren't already there." News.com's Dawn Kawamoto contributed to this report.
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