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SECURITIES AND EXCHANGE COMMISSION

Form 10-K

FOR ANNUAL AND TRANSITION REPORTS

Commission File Number: 0-22993

Indus International, Inc.

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

     Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act rule 12b-2).     Yes þ          No o

     The aggregate market value of the voting stock held by non-affiliates of the Registrant, based upon the closing sale price $2.34 per share of the Common Stock on September 30, 2003, as reported on the Nasdaq National Market, was approximately $65,779,400. Shares of Common Stock held by each officer and director and by each person who owns 5% or more of the outstanding Common Stock have been excluded in that such persons may by deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

     The number of shares outstanding of the registrant’s Common Stock, $.001 par value, was 57,062,729 at June 7, 2004.

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Registrant’s Proxy Statement for the Annual Meeting to be held on September 2, 2004 are incorporated by reference into Part III thereof.

INDUS INTERNATIONAL, INC.

FORM 10-K

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

      This Annual Report on Form 10-K, as well as documents incorporated herein by reference, may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are not based on historical facts, but rather reflect management’s current expectations concerning future results and events. These forward-looking statements generally can be identified by the use of phrases and expressions such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” “likely,” “will” or other similar words or phrases. These statements, which speak only as of the date given, are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our expectations or projections. These risks include, but are not limited to, projected growth in the emerging service delivery management market, market acceptance of our service delivery management strategy, current market conditions for our products and services, our ability to achieve growth in our asset management and customer management offerings, market acceptance and the success of our new products and enhancements and upgrades to our existing products, the success of our product development strategy, our competitive position, the ability to establish and retain partnership arrangements, our ability to develop our indirect sales channels, the successful integration of the acquisition of Wishbone Systems, Inc. (“Wishbone Systems”) including the challenges inherent in diverting our management’s attention, our ability to realize anticipated or any synergies or cost-savings from the Wishbone Systems acquisition, changes in our executive management team, uncertainty relating to and the management of personnel changes, the ability to realize the anticipated benefits of our recent restructurings, timely development and introduction of new products, releases and product enhancements, current economic conditions, heightened security and war or terrorist acts in countries of the world that affect our business, and other risks identified in the section of this Report entitled “Description of Business — Factors Affecting Future Performance,” beginning on page 15. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date hereof. The Company undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements.

PART I

Item 1.     Description of Business

General

      Indus International, Inc. develops, licenses, implements, supports, and hosts service delivery management (“SDM”) solutions, which help clients in a broad array of industries optimize the management of their customers, assets, workforce, spare parts inventory, tools and documentation in order to maximize performance and customer satisfaction while reducing operating expenses. Our software solutions consist of three primary solution suites: customer management, asset management and field service management. These software products, along with our service offerings enable our clients to reduce costs, increase production capacity and competitiveness, improve service to their customers, facilitate billing for services and ensure regulatory compliance. Historically, our solutions have been focused on asset management, and more recently on customer management. Through our acquisitions of best-in-class customer relationship management software in March 2003 and field service management technology in January 2004, we believe that we are the first company to offer comprehensive suites of world-class customer, asset, and field service management solutions, which we market and sell as our SDM solutions.

      As of March 31, 2004, our software solutions have been licensed for use by more than 400 companies, representing diverse industries, including utilities, manufacturing, chemical, oil and gas, pulp and paper, telecommunications, government, education, transportation, and consumer packaged goods. Clients include industry leaders such as Bayer Rubber, Inc., British Energy Plc., Duke Energy Corporation, Dell USA L.P. (an affiliate of Dell Inc.), Deutsche Telekom AG, GE Plastics and GE Power Systems, operating units of the General Electric Company, Electric Power Development Company Limited (also known as JPower),

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      We are a Delaware corporation formed in 1997 by the merger of The Indus Group, Inc., a California corporation, and TSW International, Inc., a Georgia corporation. In March 2003, we acquired Indus Utility Systems, Inc. (“IUS”) (formerly known as SCT Utility Systems, Inc.) from Systems and Computer Technology Corporation (“SCT”). In January 2004, we acquired Wishbone Systems, Inc. (“Wishbone Systems”). References in this filing to the “Company,” “Indus,” “we,” “our,” and “us” refer to Indus International, Inc., our predecessors and our wholly-owned and consolidated subsidiaries. Our principal executive offices are located at 3301 Windy Ridge Parkway, Atlanta, Georgia 30339, and our telephone number at that location is 770-952-8444.

Service Delivery Management Background

      The current economic climate, including increasing global competition, demands that organizations in diverse industries control costs while simultaneously increasing production capacity. For this reason, most organizations share very similar goals: increase revenues, reduce operations and maintenance expenses, increase the reliability and performance of production facilities and infrastructure, improve customer service and loyalty, reduce inventory, and make better use of limited capital. Many software vendors have offered solutions aimed at assisting companies with various aspects of this challenge — such as enterprise resource planning (“ERP”), customer relationship management (“CRM”), customer information systems (“CIS”), enterprise asset management (“EAM”), and workforce management (“WFM”). These conventional approaches, which focus only on discrete areas and systems, have yielded some marginal operational improvements, but not at levels that actually transform the business and facilitate operational excellence. We believe there is a significant opportunity for a comprehensive solution to rationalize these fragmented enterprise solutions, eliminate the inefficiencies of discrete systems, and enable companies to achieve their operational goals that are described above on a more efficient basis.

The Indus Solution

      To capitalize on this opportunity, we have developed a unique approach to operational excellence called service delivery management, or SDM, which allows our customers to eliminate the inefficiencies of employing multiple discrete enterprise systems and practices and to achieve the results described above. The SDM approach allows organizations to manage all of the business processes related to its customers, assets, and workforce across the entire enterprise — incorporating customer service, field service, design service, construction service, and maintenance service into a single comprehensive solution. Unlike any one of the discrete ERP, EAM, CRM, CIS or WFM solutions, which tend to be customer-centric, asset-centric, or workforce-centric, our SDM solutions are process-centric. SDM addresses the business flows within and across each of these disciplines, and optimizes business processes. The focus of our SDM solutions is on operational business flows across the entire organization, breaking down informational and operational silos.

      Our SDM software products encompass three disciplines in a comprehensive solution set: customer management, asset management and field service management. Focusing on the business flows within and across these critical disciplines, Indus SDM optimizes business processes to achieve operational efficiencies that can enable superior performance. Sharing this process-centric approach to operational improvement, our three solution suites within SDM drive real-time responsiveness to service needs.

      Our SDM solutions allow customers to push key analytics at the right time so that critical decisions can be made in a timely and intelligent manner via real-time performance management. With our solutions, users view and analyze key performance indicators to proactively improve efficiency and minimize costs throughout the organization. Our SDM solutions, together with our various service offerings, enable our customers to:

	•	Improve Asset Performance. Our solutions help organizations control and reduce all asset lifecycle costs, as well as budget and plan more accurately, by ensuring that assets operate at peak performance to avoid unnecessary downtime and shorten planned outages. This requires that the organization have real-time visibility into the health and condition of facilities, equipment and/or critical parts.

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	•	Maximize Financial Performance. Organizations must transition from reactive to proactive decision-making in order to optimize performance and maximize financial gain. Our solutions facilitate this transition by providing the right tools to analyze and balance the financial impact of strategic and operational initiatives across the organization, and to determine best-case alternatives.
	•	Optimize Workforce Efficiency. Organizations must operate their workforces at optimum efficiency, addressing planned and unplanned work requests in a timely and efficient manner. Instant field communications and feedback is vital. Our solutions give organizations real-time visibility into resource availability, skill sets, parts, tools, customer requirements, and documentation.
	•	Ensure Customer Loyalty. Customer loyalty is the most accurate barometer of superior performance. Our solutions enable organizations to instantly access and analyze enterprise-wide information, rapidly respond to customer requests and issues, make timely and appropriate decisions, and provide accurate billing and collection.
	•	Streamline the Supply Chain. Our solutions help organizations operate their supply chain more efficiently, with better planning and streamlined logistics. Our solutions provide increased visibility into the availability of spare parts, optimize inventory levels, and reduce the number of suppliers, while helping to deliver the right parts to the right place at the right time.

Business Strategy

      Our objective is to establish and maintain Indus as the leading provider of SDM solutions. We aim to achieve this objective by delivering the industry’s most comprehensive set of best-in-class customer, asset, and field service management solutions. These solutions help global utilities, manufacturers, telecommunications companies, original equipment manufacturers, and third-party service providers optimize and effectively manage customers, assets, and the workforce.

      Our strategies to accomplish our objective include the following:

	Develop and Enhance Software Solutions. We intend to continue to focus our product development resources on the development and enhancement of our software solutions. We offer what we believe to be the broadest solution set in the SDM marketplace and the only suite offering best-in-class solutions for customer, asset, and field service management. In order to provide additional functionality and value to our solutions, we plan to continue to provide enhancements to existing products and to introduce new products to address evolving industry standards and market needs. We identify further enhancements to our solutions and opportunities for new products through our Global Client Services organization as well as ongoing customer consulting engagements and implementations, interactions with our user groups and special interest groups and participation in industry standards and research committees, such as the Association for Services Management International, MIMOSA, and the Nuclear Energy Institute. A key near-term initiative is the development of our Indus foundation architecture (“IFA”), through which we are developing a common architectural platform for all of our applications. The objective of the IFA initiative is to ensure smooth and seamless integration between our applications and those of our partners utilizing XML, service-oriented architecture, and other advanced integration tools and techniques.
	Expand Our Strategic Alliances and Indirect Sales Channels. We currently sell our products primarily through our direct sales force. We work on joint projects and joint sales initiatives on a case-by-case basis with industry-leading consultants and software systems implementers, including most of the large consulting firms, such as Accenture, IBM Global Services, Capgemini, BearingPoint and Deloitte Consulting. This allows us to supplement our direct sales force and professional services organization. We have been expanding our indirect sales channels through reseller agreements, marketing agreements and agreements with third-party software providers, particularly internationally. Our agreements with A3 Systems Limited, a subsidiary of Yao De Computer Software Limited, in China, and Electric Power Development Company Limited (also known as JPower) in Japan, extend our market coverage and provide us with new business leads and access to trained implementation personnel. We also have strategic alliances with complementary software providers. These product partnerships, including our

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	arrangements with BEA Systems, Inc. (“BEA”), Business Objects, Inc. (“Business Objects”), ESRI, Inc., International Business Machines Corporation, webMethods, Inc., Oracle Corporation (“Oracle”) and PeopleSoft, Inc. (“PeopleSoft”), extend our solution footprints to best meet our customers’ requirements.
	Expand International Sales. We believe that our solutions offer significant benefits for customers in international markets. We have more than 100 employees outside the United States, primarily in Europe and Asia Pacific, focused on international sales, servicing our international clients, and developing reseller channels. In addition to offices in the United Kingdom, France, Japan, Canada, and Australia, we have established reseller and referral arrangements in countries across the globe, including China, Saudi Arabia, South Africa, Hungary, Russia, Egypt, and Israel. Our international strategy includes leveraging the strength of our relationships with current customers that also have significant overseas operations and the pursuit of strategic marketing partnerships with international systems integrators and third-party software application providers that are complementary to our products.
	Acquire or Invest in Complementary Businesses. We will continue to investigate strategic acquisitions of technologies, products, and businesses that may enable us to enhance and expand our SDM software products and service offerings. Where appropriate, we intend to investigate and pursue acquisitions that will provide us with complementary products and technologies, extend our presence into other vertical markets with similar operational challenges, and/or further solidify our leadership position within the emerging SDM market.

Products

      Our SDM software solutions help clients in a broad array of industries optimize the management of their customers, assets, workforce, spare parts inventory, tools and documentation. Our clients rely on our solutions to achieve best-in-class performance and significant savings — all while minimizing operating costs, improving asset reliability, optimizing customer satisfaction, improving billing processes, and ensuring regulatory compliance. Our solutions are comprised of three distinct suites: customer management, asset management, and field service management.

      Our customer management suite for energy and utility customers provides the functionality required to optimize customer-facing activities. This seamless solution suite encompasses call center, customer information tracking, billing, and accounts receivable functions. The customer management suite is comprised of the following software applications:

	•	Advantage CMS. At the core of the customer management suite is the advanced architecture of the Advantage CMS product. Built on Oracle9i application server technology, Advantage features an adaptive infrastructure and takes advantage of Oracle’s world-class functionality for Internet or intranet deployment and streamlined business processes. Advantage combines proven and scalable functionality to facilitate enterprise-wide access to information, cost controls, regulatory responsiveness, and reduced cycle times from meter reading to collection of accounts receivable.
	•	CRM Essentials. Enhancing the Advantage CMS product is CRM Essentials, a layer of customer relationship management functionality built exclusively for energy and utility companies, positioning them to lower costs and improve customer service.
	•	EnerLink. Further fortifying the Advantage CMS product is EnerLink, a complex billing solution that helps energy and utility companies use integrated applications to design, market, administer, and bill new pricing options, regardless of the market requirements. EnerLink includes flexible pricing options, robust rate modeling and bill calculation, support for a complex array of contract models, integrated data management, and meter data access.

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      Our asset management suite supports an organization’s operations and maintenance workforce, inventory management and procurement professionals, safety and compliance engineers, and other decision-making personnel affected by asset care decisions throughout the enterprise. This suite includes the following components: asset and work management systems; materials and procurement systems; supply chain; eProcurement systems; and safety and compliance systems. Other complementary components include: mobile computing, enterprise asset integration tools, sophisticated search capabilities, data warehousing products, and integration to leading ERP products for financial and human resources functions. Our asset management suite provides improved efficiencies to the management of assets, work orders, inventory, and purchasing. It helps organizations establish effective maintenance strategies for the assets they service and enables supply chain optimization. This proactive, condition-based strategy lowers maintenance costs and reduces production stoppages.

      The asset management suite includes the following software products:

	•	PassPort. Facilitates maintenance, inventory, and procurement management through integrated physical asset management, optimization, and labor/work management. PassPort features a Web-based user interface and can also be deployed on corporate portals. PassPort safety and compliance systems interoperate with other enterprise systems to improve regulatory compliance and reporting. PassPort materials and procurement systems improve overall plant performance. E-procurement capabilities add further value to PassPort by streamlining the procurement process. PassPort work management systems coordinate and communicate discrete work task requirements and priorities to all departments and disciplines throughout the enterprise.
	•	InSite EE. InSite EE is the next generation of the Indus InSite solution and it represents the culmination of our efforts during 2002 and 2003 to re-architect the previously separate EMPAC and Indus InSite products into a single solution. InSite EE provides a compelling solution for organizations with complex asset management requirements who also desire the accessibility, ease-of-use and collaborative capabilities that only a Web-architected solution can offer. InSite EE combines the powerful features of the EMPAC solution with the innovative Web-based Indus InSite platform architecture. The comprehensive feature set provides a highly scalable and flexible EAM system for complex asset-intensive enterprises. The Web-based platform and services-oriented architecture enables cost-effective implementation and flexible access across multiple departments, geographies and computing environments. Support for open communications standards facilitates real-time performance management and push maintenance strategies — enabling condition monitoring and analysis tools to push real-time asset information to InSite EE so that proactive action can be taken before assets fail. Asset and work management functionality enables customers to manage maintenance, service, and other work management requirements for all physical assets. Materials and procurement functionality focuses on the supply chain and allows customers to manage inventories and source required goods and services.

      Our field service management suite provides resource optimization to generate superior performance at low cost. This suite allows customers to dispatch resources with all the required tools, information, and parts at the promised time. Schedules are optimized based on customer or asset demands, travel times, service level agreements, technician skills requirements, and internal costs, enabling more hours “on the job, able to work.” The suite includes the following applications:

	•	WorkCenter. Indus WorkCenter is the Web-based order entry and management module. As the starting point of work and order processing, WorkCenter provides a variety of options and tools to accommodate the needs of both customers and service providers. With WorkCenter, call center representatives can initiate service requests, schedule service appointments, and check service status from any Web browser. Appointment scheduling is immediate, and the service organization is notified

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		automatically. Business rules and customer preferences ensure timely fulfillment by the ideal service provider.
	•	WorkManager. Indus WorkManager helps manage the constantly changing dynamics of field service by furnishing dispatchers with a real-time graphical representation of people, places and things in an information and response portal. All updates and changes to the schedule can be viewed as they happen. Rule violations, cost and time overruns, and other performance indicators are highlighted for action. Visual cues and filters assist management personnel with understanding the status of all work at any time. Relationships between work orders, dependencies, and the parent/child relationship within a work order are evident. Integration with leading GIS systems further enhances understanding of where personnel are deployed and how they can be routed.
	•	WorkMobile. Indus WorkMobile equips mobile service resources with real-time interactive wireless applications and access to organizational data. WorkMobile provides online Web-based or wireless access, as well as offline/sync access. Handheld and wireless communication devices enable bi-directional updates that expedite service delivery. Service personnel have real-time access to schedules, customer details, and operational response rules. They can update, close or reschedule service orders from the field with current customer information.
	•	WorkExecutive. Indus WorkExecutive is a planning, forecasting, and implementation tool that enables senior management to predict the business impact of all available execution alternatives and implement the one that is right for their business needs and objectives. Through management dashboards and reports, WorkExecutive provides the intelligence executives need to assess their execution strategy, performance, and organizational effectiveness. Factors such as the supply and demand of service personnel, response criteria and profitability are measured against key performance indicators and benchmark metrics.
	•	WorkOptimizer. Indus WorkOptimizer enhances operational achievements with optimization technology. The solution employs proprietary algorithms to calculate and accommodate complex but known variables in the field service chain to help overcome operational inefficiencies and ensure the optimal balance between profitability, effectiveness, and customer satisfaction. Real-time logistical support will allow the organization to deploy field personnel with the right skills to the right place at the right time.

Services

      Our SDM solutions include consulting and other services offered as part of the Indus Service Select program. Our Service Select program is comprised of services, tools and programs that address the full lifecycle of our solutions, including implementation, production, and continuous business improvement. Our service offerings include comprehensive implementation programs, strategic consulting, e-Learning and training solutions, three-tiered maintenance and support plans, and hosting and outsourcing services. Indus offers a variety of tailored or packaged services designed to help clients continuously improve their operations, achieve a faster return on investment, and meet their unique business challenges. Our Service Select program includes the following service offerings: professional services, Indus Knowledge Delivery, Global Clients Services, and hosting services.

      Our professional services include sophisticated implementation services, as well as strategic consulting in pre-implementation assessment/selection analysis, project justification, business case support, performance benchmarking, root cause analysis, and post-implementation optimization. Extended services include migration and upgrade assistance. Our professional services are provided by subject matter experts that typically have a long tenure with Indus. These regionally located experts support our sales organization by helping customers implement advanced principles, theories, and other advanced “best practice” strategies designed to provide a competitive advantage to the customer. The knowledge gained from prior customer implementations, the extensive experience of our employees, and the global experience of our user community

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      Indus products are typically implemented through our proprietary ABACUS tools and methodology. ABACUS consists of software-driven analytical tools, implementation plans, and educational resources that consolidate our extensive experience in implementing software products. ABACUS provides a step-by-step implementation lifecycle framework for all installation, integration, education, and business review activities. In addition, ABACUS enhances the ongoing effectiveness of Indus software products and assists customers in improving their business processes.

      We have also developed relationships with large systems integrators, as well as smaller third-party implementers and providers. This ensures that customers with specific requirements can leverage the value-added services of these firms when implementing Indus software products. These relationships are further described under “Business — Strategic Relationships.”

      We also provide education and training solutions, including off-the-shelf and customized e-Learning programs. These solutions include standalone Web-based training courses and easy-to-use online classroom and job-aids called Desktop Navigators. These Desktop Navigators provide detailed step-by-step tutorials and a means to deliver business process workflow integration to communicate, implement, and deliver leading work practices across an entire enterprise. We also provide in-depth classroom training at Indus sites worldwide or in clients’ facilities.

      We offer three levels of comprehensive maintenance and support plans that provide our customers with timely access to support professionals, client advocate engagement, product updates, and new software releases that offer improved functionality. Our Global Client Service Centers are strategically located in North America, the United Kingdom, and the Asia-Pacific region. Two of our three service programs provide extended telephone service after business hours for production-down and critical issues, 24 hours a day, either 5 or 7 days a week. Regardless of the call’s time or point-of-origin, our toll-free number automatically routes the customer’s call to a fully staffed Global Client Service Center.

      PassPort, InSite EE, and Advantage CMS products are available as hosted services fully supported through remote data centers. We are responsible for the customer’s hosted system, and we are the single point of contact for any functionality issues. The hosted service offers comprehensive functionality, reduces implementation time, and guarantees service levels. Additionally, our hosted service integrates with customer legacy systems, delivering a true best-in-class product that includes many touch points with other industry software application leaders such as Oracle, PeopleSoft and SAP.

      The hosted service contains robust, layered security to protect customer data. Our hosted infrastructure partners provide a suite of services that expertly manage mission-critical software. With a large, multi-specialized, technical staff of certified engineers, the infrastructure partners provide the level of services and expertise necessary to ensure secure, scalable, high-performance operation 24x7. Their services include installation and maintenance of hardware and software, core software expertise, high-volume backup and recovery systems, and constant, proactive monitoring by their server operations center.

Sales and Marketing

      We market and sell our products and services to customers around the world in a variety of industries. To address our markets effectively, we divide our target markets by geography and by industry segment and tailor our sales strategy to suit the specific needs of each market segment. In a given market segment, we may sell

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	•	Americas, with direct sales representatives in the United States and Canada, and strategic partnerships to expand the scope of sales opportunities.
	•	Europe, Middle East and Africa, with direct sales representatives in the United Kingdom and France, as well as partnerships which extend our selling capability into continental Europe, the Middle East and Africa.
	•	Asia-Pacific, with direct sales representatives in Australia and Japan and strategic partnerships to expand the scope of sales opportunities.

      In each of these regions, we view the market opportunities as consisting of multiple vertical business segments. We focus our sales and marketing efforts on the following industries:

	•	Utilities
	•	Water and waste treatment
	•	Nuclear power generation
	•	Fossil power generation
	•	Hydroelectric power generation
	•	Energy transmission and substations
	•	Energy distribution and delivery
	•	Energy resource extraction and process industries
	•	Chemical, petrochemical, oil and gas
	•	Metals and mining
	•	Pulp, paper and forest products
	•	Process manufacturing
	•	Discrete manufacturing
	•	Consumer packaged goods
	•	Facilities management
	•	Managed services
	•	Telecommunications
	•	High-tech and electronics

      By addressing the needs of various vertical industries separately, we can package and deliver our product offerings to meet the specific needs of the industries we serve. We conduct comprehensive industry-specific vertical marketing programs, which include public relations, trade advertising, industry seminars, trade shows, and ongoing customer communication programs such as IndusWorld, our international user group conference.

      While the sales cycle varies depending on the customer and the product being sold, our sales cycles generally require from three to 18 months. The direct sales cycle begins with the generation of a sales lead or the receipt of a request for proposal from a prospect, followed by qualification of the lead, analysis of the customer’s needs, response to a request for proposal, one or more presentations to the customer utilizing the

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      After implementation of an Indus solution, our account executive program provides regional support and specialized attention for each of our customers. Account executives assist in implementing licensed applications over multi-year engagements, promote licensing of additional applications and encourage existing customers to identify and help fund new applications and expanded core offerings.

Product Development

      Our development efforts are focused on adding new functionality to existing products, integrating our various product offerings, enhancing the operability of our products across distributed and alternative hardware platforms, operating systems and database systems, and developing new products. We believe that our future success depends in part upon our ability to continue to enhance existing products, to respond to rapidly changing customer requirements, and to develop new or enhanced products that incorporate new technological developments and emerging maintenance and industry standards. To that end, our development efforts frequently focus on base system enhancements and the incorporation into our products of new user requirements and features identified and created through customer and industry interactions and systems implementations. As a result, we are able to continue to offer our customers a packaged, highly configurable product with increasing functionality rather than a custom-developed software program.

      A key near term initiative in our development program is the development of our IFA, through which we are developing a common architectural platform for all of our applications. The objective of the IFA initiative is to ensure smooth and seamless integration between our applications and those of our partners utilizing XML, service-oriented architecture, and other advanced integration tools and techniques.

      We believe that research and development is most effectively accomplished if customers are involved in the process. Through direct customer involvement and consensus input from user group oversight committees, product content is improved and the customer acceptance of new software deployment is significantly increased. In addition, the interactive development process promotes increased customer awareness of our products’ technological features and fosters greater product loyalty. For this reason, we regularly incorporate customers into the product development process and compile direct feedback through special interest groups, user conferences, and early adopter programs.

      We plan to principally conduct our development efforts internally in order to retain development knowledge and promote the continuity of programming standards; however, some projects that can be performed separately have been and will continue to be outsourced in the foreseeable future. We have established an off-shore development center in Bangalore, India, where significant development activities are performed.

      Our research and development expenses for the years ended December 31, 2001 and 2002, the three-month period ended March 31, 2003 and the year ended March 31, 2004 were $49.5 million, $45.7 million, $8.7 million, and $35.0 million, respectively. We intend to continue to make significant investments in product development.

Strategic Relationships

      Through a network of strategic relationships established with more than 50 technology and service partners, we leverage our internal sales and marketing efforts, expand our implementation capabilities, and enhance the breadth of our solutions.

      We typically work with large systems integrators, such as Accenture, IBM Global Services, BearingPoint, Capgemini and Deloitte Consulting, as well as smaller implementers, on an opportunity-by-opportunity basis. In some instances, we have agreements with systems integrators that provide the framework for the relationship, such as our agreements with Capgemini U.S. LLC and Deloitte Tohmatsu Consulting Co.,

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      In addition to working with large systems integrators to expand our sales channels and marketing efforts, we also enter into reseller agreements, referral agreements, and marketing agreements with third parties that can extend our market coverage, particularly internationally. For example, our agreements with A3 Systems Limited, a subsidiary of Yao De Computer Software Limited, in China, and Electric Power Development Company Limited (also known as JPower) in Japan, extend our market coverage and provide us with new business leads and access to trained implementation and support personnel.

      We enter into strategic relationships with software product partners to expand the functionality of our existing solutions, enabling us to continue our focus on developing and delivering SDM solutions. We plan to continue our strategy of leveraging strategic partnerships as the needs of our customers continually evolve and the global marketplace expands. By combining our own SDM software solutions with our partners’ market-focused products and services, we provide our customers with the ability to maximize their return on investment, while providing us with additional software license fees and services.

      Our strategic relationships with third party software providers take a variety of forms, such as reseller agreements, embedded software arrangements, and development arrangements. Reseller agreements, such as our agreement with Oracle, typically allow us to develop software solutions using third party software, and resell that third party software in connection with our software solutions. Embedded software arrangements, such as our agreements with BEA and Business Objects, typically allow us to develop software solutions using third party software, and resell that third party software embedded in our software solutions. Development agreements allow us to develop software to integrate our solutions with that of the third party, which extends the functionality of our software solutions by making them interoperable with various third party applications. Examples of these types of arrangements include our agreements with PeopleSoft and Oracle, which allow us to develop solutions that integrate with PeopleSoft’s corporate financial, payroll and human resources applications and Oracle corporate financial applications.

      The following highlights several of our software product partners:

	•	BEA — supports Indus customers’ need to design and automate business processes that integrate back-end applications and e-commerce technologies.
	•	Oracle — provides database platform as well as Oracle Financials integration. We are a member of the Oracle Partner Network, as a Certified Advantage Partner.
	•	Business Objects — provides business intelligence that lets organizations access, analyze, and share information internally with employees and externally with customers, suppliers, and partners.

Customers

      The Company provides software products and services to customers in the following industries:

	•	Utilities, including water and waste water treatment, power generation, and energy transmission and distribution;
	•	Manufacturing;

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	•	Chemical and petrochemical;
	•	Oil and gas;
	•	Pulp and paper;
	•	Metals and mining;
	•	Telecommunications;
	•	Government and education;
	•	Transportation; and
	•	Consumer packaged goods.

      Customers include industry leaders such as Bayer Rubber, Inc., British Energy Plc., Duke Energy Corporation, Dell USA L.P. (an affiliate of Dell Inc.), Deutsche Telekom AG, GE Plastics and GE Power Systems, operating units of the General Electric Company, Electric Power Development Company Limited (also known as JPower), Progress Energy Service Company LLC, Shaw Industries, Inc., Smurfit-Stone Container Corporation, The Kroger Co., Tokyo Electric Power Company, and Xcel Energy Services, Inc..

      For the fiscal year ended March 31, 2004, 8.4% of the Company’s revenues related to our contract with Magnox Electric plc, a wholly owned subsidiary of British Nuclear Fuels Ltd (“BNFL”), which operates BNFL’s nuclear power stations.

Competition

      Our products are targeted at the SDM market, which is highly fragmented. The customer, asset, and field service management software products businesses with which we compete are highly competitive and characterized by rapid technological change. They are significantly affected by new product and technology innovations brought about by industry participants. We believe that the principal competitive factors in our businesses will be:

	•	Product quality, return on investment, performance, and functionality;
	•	Adaptability to new trends driven by technology and customer requirements;
	•	Cost of internal product development as compared with cost of purchase of products from outside vendors;
	•	Ease and speed of implementation;
	•	Cost of ongoing maintenance; and
	•	Time-to-market with, and market acceptance of, new products, enhancements, functionality and services.

      In the asset management market, our main competitors are MRO Software, Inc., Datastream Systems, Inc., SAP, Oracle, Mincom Corp., Industrial and Financial Systems, Invensys, Severn Trent Systems and Synercom. In the customer management market, our primary competitors include SPL WorldGroup, PeopleSoft, Inc., SAP, Peace Software, Cayenta (a subsidiary of Titan), and Orcaom. In the field service management market, our primary competitors include Siebel Systems, Inc., Mobile Data Solutions Inc., ClickSoftware Technologies Ltd., Astea International, SAP, Metrix, Amdocs, and FieldCentrix.

      We believe that we have key competitive strengths that will help us establish and maintain leadership in the emerging SDM market. Our strategic assets and competitive advantages include:

	•	Depth and breadth of products. We believe that no other software vendor offers the breadth of customer, asset, and field service management applications, coupled with the depth of functionality offered in our solutions.
	•	Scalability of our products. Our solutions are able to scale up to multiple thousands of users.

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	•	Substantial installed base. Over the past 25 years, we have attained the leading market share position in the “Tier 1” market (customers having annual revenues greater than $1 billion dollars) for asset management software solutions — especially among utilities and process manufacturers. This installed base provides us with a fertile source for selling our comprehensive SDM solutions, including our recently acquired workforce management software, as well as providing us with numerous client references that can help us close deals with new prospects.
	•	Industry expertise. Our professional services are provided by experts with extensive industry experience. This experience and domain knowledge gained from prior implementations allows us to enhance new implementations with industry-specific best practices.

International Operations

      Our international revenue was approximately $72.2 million, $39.8 million, $9.5 million and $30.6 million for the years ended December 31, 2001 and 2002, the three-month period ended March 31, 2003 and the year ended March 31, 2004, respectively, which represents approximately 41%, 34%, 35% and 21% of our total revenue for each of those periods, respectively. International revenue includes all revenue derived from sales to customers outside the United States. We now have more than 100 employees outside the United States, most of who are located in the United Kingdom and Australia. We also have offices in Canada, France, and Japan.

      We conduct our direct European operations principally out of our office in the United Kingdom, where we have approximately 70 employees. Total revenue for European operations was approximately $19.5 million for the fiscal year ended March 31, 2004, which represents approximately 13.3% of our total revenue for the year. Our direct Asia-Pacific operations are conducted out of our office in Brisbane, Australia. Total revenue for Asia-Pacific operations was approximately $6.0 million for the fiscal year ended March 31, 2004, which represents approximately 4.1% of our total revenue for the year. We have a growing presence in Japan where deregulation of the nuclear industry is helping to fuel demand for our asset management solutions in particular.

Proprietary Rights and Licensing

      We rely on a combination of the protections provided under applicable copyright, trademark, and trade secret laws, as well as on confidentiality procedures, licensing arrangements, and other contractual arrangements to establish and protect our rights in our software. Despite our efforts, it may be possible for unauthorized third parties to copy certain portions of our products or to reverse engineer or obtain and use information that we regard as proprietary. In addition, the laws of certain countries do not protect our proprietary rights to the same extent as do the laws of the United States. Furthermore, we have no patents, and existing copyright laws afford only limited protection. Accordingly, there can be no assurance that we will be able to protect our proprietary software against unauthorized third-party copying or use, which could adversely affect our competitive position.

      We license our applications to customers under license agreements, which are generally in standard form, although each license is individually negotiated and may contain variations. The standard form agreement allows the customer to use our products solely on the customer’s computer equipment for the customer’s internal purposes, and the customer is generally prohibited from sub-licensing or transferring the applications. The agreements generally provide that the warranty for our products is limited to correction or replacement of the affected product, and in most cases the warranty liability may not exceed the licensing fees from the customer. Our standard form agreement also includes a confidentiality clause protecting proprietary information relating to the licensed applications.

      Our products are generally provided to customers in object code (machine-readable) format only. From time to time, in limited circumstances, we licensed source code (human-readable form) for asset management software, subject to customary protections such as use restrictions and confidentiality agreements. We have historically licensed source code for certain customer management applications, subject to customary protections such as use restrictions and confidentiality agreements. In addition, customers can be beneficiaries of a master source code escrow for the applications, pursuant to which the source code will be released to end

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      We may from time to time receive notices from third parties claiming infringement by our products of proprietary rights of others. As the number of software products in the industry increases and the functionality of these products further overlap, we believe that software developers may become increasingly subject to infringement claims. Any such claims, with or without merit, can be time consuming and expensive to defend or could require us to enter into royalty and licensing agreements. Such agreements, if required, may not be available on terms acceptable to us.

      Indus, Indus Solution Series, IndusWorld, Advantage, PassPort, PassPort Software Solutions, EMPAC, Enterprise MPAC, Indus InSite, InSite EE, Service Delivery Management, SDM, ABACUS, IndusKnowledgeWarehouse, IndusConnect, IndusBuyDemand, IndusAnyWare, IndusASP, and Curator are trademarks and service marks of the Company. All other brand names or trademarks referenced in this Annual Report are the property of their respective holders.

Employees

      At April 30, 2004, Indus had approximately 850 full-time employees. None of our employees are covered by a collective bargaining agreement, and we have never experienced a work stoppage, strike or labor dispute. We believe that our relations with our employees are good.

Executive Officers

      The executive officers of the Company are as follows:

      Mr. Madison has served as Chairman of the Board of Indus since December 2001 and as a director of Indus since April 2001. From July 2002 through January 2004, Mr. Madison served as Chief Executive Officer of Indus. From January 2001 until December 2001, Mr. Madison served as an independent management consultant. From May 1999 until January 2001, Mr. Madison served as President and Chief Executive Officer of Talus Solutions, a developer of products and services that optimize pricing strategies and practices based upon customer buying behaviors. From March 1994 until May 1999, Mr. Madison served as Group President and Corporate Vice President of Computer Sciences Corp. Mr. Madison also serves as a director of Alogent, Inc., EVANT, Inc. and Kiodex, Inc.

      Mr. Dukat has served as President of Indus since August 2003 and as Chief Executive Officer of Indus since February 2004. From August 2003 until his promotion in February 2004, Mr. Dukat served as President and Chief Operating Officer. Mr. Dukat joined Indus in September 2002 as Executive Vice President of Worldwide Operations to lead the Company’s global sales and marketing efforts, and was promoted to President and Chief Operating Officer in August 2003 with responsibility for all sales, marketing, customer service, product strategy, and product development functions. From September 2001 to April 2002, Mr. Dukat served as the Chief Executive Officer for 180 Commerce, Inc., a start-up reverse supply chain enterprise software company. From October 1989 to September 2001, Mr. Dukat served in various positions at J.D. Edwards, an enterprise software provider, most recently as Vice President and General Manager. Mr. Dukat is a board member of CSS Consulting Corporation and holds a Bachelor’s of Science degree in business administration from the University of New York at Buffalo.

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      Mr. Williams joined Indus as its Executive Vice President and Chief Financial Officer in June 2004. Prior to joining Indus, Mr. Williams served as Chief Financial Officer of Cendian Corporation, a provider of logistics services to the chemical industry, from October 2002 to May 2004. From February 2000 to September 2002, Mr. Williams served as Senior Vice President, Chief Financial Officer and Treasurer of Manhattan Associates, Inc., a leading supplier of supply chain software. From February 1996 to February 2000, Mr. Williams served as Group Vice President, Finance and Administration for Sterling Commerce, a worldwide leader in providing e-business solutions for the Global 5000 companies. From December 1994 to January 1996, Mr. Williams served as Division Vice President, Finance and Administration for Sterling Software, one of the 20 largest independent software companies in the world. Although Mr. Williams assumed the title of Chief Financial Officer in June 2004, he will not be performing the functions of principal accounting and financial officer until after the filing of this Annual Report on Form 10-K, and therefore will not be signing this report.

      Mr. Gregg was promoted to Executive Vice President of Field Operations in February 2004. Prior to his promotion, Mr. Gregg served as President of the IUS division since March 2003, when Indus acquired SCT Utility Systems, Inc. from SCT. From November 1993 to March 2003, Mr. Gregg served in various positions with SCT Utility Systems, Inc., a wholly-owned subsidiary of SCT, most recently as President from November 2000 until the acquisition by Indus. Mr. Gregg served as the Executive Coordinator of Northside Baptist Church during a 10-month sabbatical in 1999.

Employment Agreements

      All the current executive officers of the Company have employment contracts with the Company.

Exchange Act Reports

      We maintain an Internet web site at the following address: www.indus.com. The information on our web site is not incorporated by reference in this annual report on Form 10-K.

      We make available on or through our website certain reports and amendments to those reports that we file or furnish to the Securities and Exchange Commission (the “SEC”) in accordance with the Securities Exchange Act of 1934, as amended. These include our annual reports on Form 10-K, our quarterly reports on Form 10-Q, and our current reports on Form 8-K. We make this information available on our web site free of charge as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC.

FACTORS AFFECTING FUTURE PERFORMANCE

      Our operating results have fluctuated in the past, and our results may fluctuate significantly in the future. Our operating results may fluctuate from quarter-to-quarter and may be negatively affected as a result of a number of factors, including:

	•	the relatively long sales cycles for our products;
	•	the variable size and timing of individual license transactions;
	•	delays associated with product development, including the development and introduction of new products and new releases of existing products;
	•	the development and introduction of new operating systems and/or technological changes in computer systems that require additional development efforts;
	•	our success in, and costs associated with, developing, introducing and marketing new products;
	•	changes in the proportion of revenues attributable to license fees, hosting fees and services;

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	•	personnel changes, including changes in our management;
	•	changes in the level of operating expenses;
	•	software defects and other product quality problems and the costs associated with solving those problems; and
	•	successful completion of customer funded development.

      Changes in operating expenses or variations in the timing of recognition of specific revenues resulting from any of these factors can cause significant variations in operating results from quarter-to-quarter and may in some future quarter result in losses or have a material adverse effect on our business or results of operations.

      We generated a net loss of $12.0 million in the fiscal year ended March 31, 2004, and used cash of $3.8 million in operating activities during the same period. For the three-month period ended March 31, 2004, we generated net income of $651,000 and used cash of $850,000 in operating activities. If we are unable to maintain profitability or produce positive cash flow from operations in the near future it will negatively affect our capacity to implement our business strategy and may require us to take actions in the short-term that will impair the long-term prospects of our business. If we are unable to maintain profitability or produce positive cash flow from operations in the near future it may also result in liquidity problems and impair our ability to finance our continuing business operations on terms that are acceptable to us. Further, we may need to enter into financing transactions that are dilutive to our stockholders’ equity ownership in our company.

      From time to time, we expand into new markets. For example, in January 2004, we announced our service delivery management solutions for utilities. The market for service delivery management solutions is an emerging market. If customers’ demand in this emerging market does not grow as anticipated or if our service delivery management solution is not accepted in the market place, then we may not be able to grow our business.

      From time to time, we acquire new products, launch new products, and release enhancements or upgrades to existing products. For example, in March 2004, we released PassPort 10.0, one of our asset management solutions. In January 2004, we acquired the Wishbone Service Suite, a suite of field service management modules that forms a part of our service delivery management offering. In addition, in December 2003, we introduced InSite EE, the consolidation of our EMPAC and Indus InSite enterprise asset management products into a single software solution. There can be no assurance that any of our new or enhanced products, including PassPort 10.0, the field service management suite acquired from Wishbone Systems, and InSite EE, will be sold successfully or that they can achieve market acceptance. Our future success with these products and other next generation product offerings will depend on our ability to accurately determine the functionality and features required by our customers, as well as the ability to enhance our products and deliver them in a timely manner. We cannot predict the present and future size of the potential market for our next generation of products, and we may incur substantial costs to enhance and modify our products and services in order to meet the demands of this potential market.

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      Overall demand for enterprise asset management software and customer relationship management software in general may grow slowly or decrease in upcoming quarters and years because of unfavorable general economic conditions, decreased spending by companies in need of our solutions or otherwise. This may reflect a saturation of the market for enterprise asset management software and customer relationship management software generally, as well as deregulation and retrenchments affecting the way companies purchase our software. To the extent that there is a slowdown in the overall market for our solutions, our business, results of operations and financial condition are likely to be materially adversely affected.

      We have, in the past, experienced delays in product development that have negatively affected our relationships with existing customers and have resulted in lost sales of our products and services to existing and prospective customers and our failure to recover our product development costs. There can be no assurance that we will not experience further delays in connection with our current product development or future development activities. If we are unable to develop and introduce new products, or enhancements to existing products, in a timely manner in response to changing market conditions or customer requirements, our business, operating results and financial condition will be materially and adversely affected. Because we have limited resources, we must effectively manage and properly allocate and prioritize our product development efforts and our porting efforts relating to newer products and operating systems. There can be no assurance that these efforts will be successful or, even if successful, that any resulting products or operating systems will achieve customer acceptance.

      Following license sales to new customers, the implementation of our products and their extended solutions generally involves a lengthy process, including customer training and consultation. In addition, we are often engaged by our existing customers for other lengthy professional services projects. A successful implementation or other professional services project requires a close working relationship between us, the customer and, if applicable, third-party consultants and systems integrators who assist in the process. These factors may increase the costs associated with completion of any given sale, increase the risks of collection of amounts due during implementation or other professional services projects, and increase risks of cancellation or delay of such projects. Delays in the completion of a product implementation or with any other professional services project may require that the revenues associated with such implementation or project be recognized over a longer period than originally anticipated, or may result in disputes with customers regarding performance by us and payment by the customers. Such delays in the implementation have caused, and may in the future cause, material fluctuations in our operating results. Similarly, customers may typically cancel implementation projects at any time without penalty, and such cancellation could have a material adverse effect on our business or results of operations. Because our expenses are relatively fixed, a small variation in the timing of recognition of specific revenues can cause significant variations in operating results from quarter-to-quarter and may in some further quarter result in losses or have a material adverse effect on our business or results of operations.

      We have experienced significant change in our executive management team in recent months. In October 2003, Gregory Dukat was promoted from Executive Vice President of Worldwide Operations to President and Chief Operating Officer, and in February 2004, he was promoted to President and Chief Executive Officer. In February 2004, John Gregg was promoted to Executive Vice President of Field Operations. In June 2004, we

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      Our future success depends, in significant part, upon the continued service of our key technical, sales and senior management personnel, as well as our ability to attract and retain new personnel. Competition for qualified sales, technical and other personnel is intense, and there can be no assurance that we will be able to attract, assimilate or retain additional highly qualified employees in the future. Our ability to attract, assimilate and retain key personnel may be adversely impacted by the fact that we have reduced our work force by 12% in the fiscal year ended March 31, 2004 and that, in order to reduce our operating expenses, we have generally not increased wages or salaries over the last two years. If we are unable to offer competitive salaries and bonuses, our key technical, sales and senior management personnel may be unwilling to continue service for us, and it may be difficult for us to attract new personnel. If we were unable to hire and retain personnel, particularly in senior management positions, our business, operating results and financial condition would be materially adversely affected. Further additions of new personnel and departures of existing personnel, particularly in key positions, can be disruptive and have a material adverse effect on our business, operating results and financial condition.

      Over the last several years we have undertaken several internal restructuring initiatives. For example, in March 2002, our Board of Directors approved a restructuring plan that, among other things, resulted in a reduction in force and the closing of our Dallas office. During the second half of 2002, due to unfavorable financial performance and management reviews of worldwide operations, we reconfigured our business model and implemented several reductions in workforce and other cost reductions to restructure and resize the business. In May 2004, we announced a restructuring plan to consolidate office space, outsource some development functions and consolidate some business functions, which also resulted in a reduction in force. These types of internal restructurings have operational risks, including reduced productivity and lack of focus as we terminate some employees and assign new tasks and provide training to other employees. In addition, there can be no assurance that we will achieve the anticipated cost savings from these restructurings and any failure to achieve the anticipated cost savings could cause our financial results to fall short of expectations and adversely affect our financial position.

      We have taken charges for restructuring of $10.2 million in 2001, $8.2 million in 2002, $2.2 million in the transition period ended March 31, 2003, and $44,000 in the fiscal year ended March 31, 2004. In addition, as a result of the restructuring plan announced in May 2004, we anticipate taking a restructuring charge of approximately $11 million in the quarter ended June 30, 2004, as well as some incremental charges resulting from this restructuring plan in future periods. There can be no assurance that additional charges for restructuring expenses will not be required in future periods. Significant future restructuring charges could cause financial results to be unfavorable.

      All acquisitions, including the Wishbone Systems acquisition, involve specific risks. Some of these risks include:

	•	the assumption of unanticipated liabilities and contingencies;
	•	diversion of our management’s attention;

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	•	inability to achieve market acceptance of acquired products; and
	•	possible reduction of our reported asset values and earnings because of:

	•	goodwill impairment;
	•	increased interest costs;
	•	issuances of additional securities or debt; and
	•	difficulties in integrating acquired businesses and assets.

      As we grow and attempt to integrate any business and assets that we may acquire, including those in the Wishbone Systems acquisition, we can give no assurance that we will be able to:

	•	properly maintain and take advantage of the business or value of any acquired business and assets;
	•	identify suitable acquisition candidates;
	•	complete any additional acquisitions; or
	•	integrate any acquired businesses or assets into our operations.

      Changes to our business and customer base have placed a strain on management and operations. Previous expansion had resulted in substantial growth in the number of our employees, the scope of our operating and financial systems and the geographic area of our operations, resulting in increased responsibility for management personnel. Our restructuring activities in recent years and our acquisitions of IUS and Wishbone Systems have recently placed additional demands on management. In connection with our restructuring activities and our acquisitions of IUS and Wishbone Systems, we will be required to effectively manage our operations, improve our financial and management controls, reporting systems and procedures on a timely basis and to train and manage our employee work force. There can be no assurance that we will be able to effectively manage our operations and failure to do so would have a material adverse effect on our business, operating results and financial condition.

      Our success depends, in part, on our ability to develop more advanced products more quickly and less expensively than our existing and potential competitors and to educate potential customers on the benefits of licensing our products. Some of our competitors have substantially greater financial, technical, sales, marketing and other resources, as well as greater name recognition and a larger customer base than us, which may allow them to introduce products with more features, greater functionality and lower prices than our products. These competitors could also bundle existing or new products with other, more established products in order to effectively compete with us.

      Increased competition is likely to result in price reductions, reduced gross margins and loss of sales volume, any of which could materially and adversely affect our business, operating results, and financial condition. Any material reduction in the price of our products would negatively affect our gross revenues and could have a material adverse effect on our business, operating results, and financial condition. There can be no assurance that we will be able to compete successfully against current and future competitors, and if we fail to do so we may be unable to maintain or increase or market share.

      The industries in which we participate are characterized by rapid technological change, evolving industry standards in computer hardware and software technology, changes in customer requirements and frequent new

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      We believe that our future growth also will depend on developing and maintaining successful strategic relationships or partnerships with systems integrators and other technology companies. One of our strategies is to continue to increase the proportion of customers served through these indirect channels. Our inability to partner with other technology companies and qualified systems integrators could adversely affect our results of operations. Because lower unit prices are typically charged on sales made through indirect channels, increased indirect sales could reduce our average selling prices and result in lower gross margins. As indirect sales increase, our direct contact with our customer base will decrease, and we may have more difficulty accurately forecasting sales, evaluating customer satisfaction and recognizing emerging customer requirements. In addition, sales of our products through indirect channels may reduce our professional service revenues, as the third-party systems integrators reselling our products provide these services. Further, when third-party integrators install our products and train customers to us our products, it could result in more instances of incorrect product installation, failure to properly train the customer, or general failure of an integrator to satisfy the customer, which could have a negative effect on our relationship with the integrator and the customer. Such problems could damage our reputation and the reputation of our products and services. In addition, we may face additional competition from these systems integrators and third-party software providers who develop, acquire or market products competitive with our products.

      Our strategy of marketing our products directly to customers and indirectly through systems integrators and other technology companies may result in distribution channel conflicts. Our direct sales efforts may compete with those of our indirect channels and, to the extent different systems integrators target the same customers, systems integrators may also come into conflict with each other. Any channel conflicts that develop may have a material adverse effect on our relationships with systems integrators or hurt our ability to attract new systems integrators to market our products.

      We are not directly subject to regulation by any governmental agency, other than regulations applicable to businesses generally, and there are currently few laws or regulations addressing the products and services we provide. We do, however, license our products and provide services, from time to time, to the government, government agencies, and government contractors and to other customers that are in industries regulated by the government. As a result, our operations, as they relate to our relationships with governmental entities and customers in regulated industries, are governed by certain laws and regulations. These laws and regulations are subject to change without notice to us. In some instances, compliance with these laws and regulations may be difficult or costly, which may negatively affect our business and results of operation. In addition, if we fail to comply with these laws and regulations, we may be subject to significant penalties and fines that could materially negatively affect our business, results of operations and financial position.

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      International revenues (from sales outside the United States) accounted for approximately 41% and 34% of total revenues for the years ended December 31, 2001 and 2002, respectively, 35% of total revenues for the transition period ended March 31, 2003, and 21% of total revenues for the fiscal year ended March 31, 2004. We maintain an operational presence and have established support offices in the United Kingdom, Canada, Australia, France and Japan. We expect international sales to continue to be a material component of our business. However, there can be no assurance that we will be able to maintain or increase international market demand for our products. In addition, international expansion may require us to establish additional foreign operations and hire additional personnel. This may require significant management attention and financial resources and could adversely affect our operating margins. To the extent we are unable to expand foreign operations in a timely manner, our growth, if any, in international sales will be limited, and our business, operating results and financial condition could be materially and adversely affected.

      At March 31, 2004, a significant portion of our cash was held in Pound Sterling or other foreign currencies (Australian Dollars, Canadian Dollars, Euros, and Japanese Yen). In the future, we may need to exchange some of the cash held in Pound Sterling, or other foreign currencies, to U.S. Dollars. We do not engage in hedging transactions, and an unfavorable foreign exchange rate at the time of conversion to U.S. Dollars would adversely affect the net fair value of the foreign denominated cash upon conversion.

      Our international business also involves a number of additional risks, including:

	•	lack of acceptance of localized products;
	•	cultural differences in the conduct of business;
	•	longer accounts receivable payment cycles;
	•	greater difficulty in accounts receivable collection;
	•	seasonality due to the annual slow-down in European business activity during the third calendar quarter;
	•	unexpected changes in regulatory requirements and royalty and withholding taxes that restrict the repatriation of earnings;
	•	tariffs and other trade barriers;
	•	the burden of complying with a wide variety of foreign laws; and
	•	negative effects relating to hostilities, war or terrorist acts.

      To the extent profit is generated or losses are incurred in foreign countries, our effective income tax rate may be materially and adversely affected. In some markets, localization of our products will be essential to achieve market penetration. We may incur substantial costs and experience delays in localizing our products, and there can be no assurance that any localized product will ever generate significant revenues. There can be no assurance that any of the factors described herein will not have a material adverse effect on our future international sales and operations and, consequently, our business, operating results and financial condition.

      Our success is heavily dependent upon our proprietary technology. We rely on a combination of the protections provided under applicable copyright, trademark and trade secret laws, confidentiality procedures and license arrangements to establish and protect our proprietary rights. As part of our confidentiality

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      We are not aware that any of our products, including the products we acquired in the IUS and Wishbone Systems acquisitions, infringe the proprietary rights of third parties. There can be no assurance, however, that a third-party will not assert that our technology violates its patents or other proprietary rights in the future. As the number of software products in the industry increases and the functionality of these products further overlap, we believe that software developers may become increasingly subject to infringement claims. Any such claims, with or without merit, can be time consuming and expensive to defend or could require us to enter into royalty and license agreements. Such royalty or license agreements, if required, may not be available on terms acceptable to us or at all, which could have a material adverse effect upon our business, operating results and financial condition.

      The purchase of our software products by a customer generally involves a significant commitment of capital over a long period of time, with the risk of delays frequently associated with large capital expenditures procedures within an organization, such as budgetary constraints and internal approval review. During the sales process, we may devote significant time and resources to a prospective customer, including costs associated with multiple site visits, product demonstrations and feasibility studies, and experience significant delays over which we will have no control. Any such delays in the execution of orders have caused, and may in the future cause, material fluctuations in our operating results.

      The sale and support of our products may entail the risk of product liability claims. Our license agreements typically contain provisions designed to limit exposure to potential product liability claims. It is possible, however, that the limitation of liability provisions contained in such license agreements may not be effective as a result of federal, state or local laws or ordinances or unfavorable judicial decisions. A successful product liability claim brought against us relating to our product or third-party software embedded in our products could have a material adverse effect upon our business, operating results and financial condition.

      The market price of our common stock could drop as a result of sales of large numbers of shares in the market, or the perception that such sales could occur. On February 9, 2004 we completed a private placement for 5.0 million shares of the Company’s common stock and agreed to register these shares for resale without restriction with the Securities and Exchange Commission. We filed a registration statement to register these shares for resale, which has been declared effective by the Commission, and these shares are freely transferable without restriction.

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      Since there is minimal trading volume in our common stock, stockholders wishing to sell even small numbers of shares could have a negative impact on the price of our common stock. If the holders of significant amounts of our common stock, including those stockholders who acquired shares of our common stock in connection with our recent private placement, desire to sell their shares, our stock price would be materially, negatively affected.

Item 2. Properties

      Certain information concerning the Company’s leased and owned office space at March 31, 2004 is set forth below:

(1)	Lease expired in April 2004 and the Company has since vacated this space.

      The leased and owned office space listed above comprises space in active use. Space leased to third parties under sub-lease arrangements and excess space offered for sublease has been excluded. See Note 6 to the Consolidated Financial Statements for further discussion.

      Management continually evaluates operational requirements and adjusts facilities capacity where necessary.

Item 3. Legal Proceedings

      On March 5, 2003, the Company acquired IUS from Systems and Computer Technology Corporation (“SCT”). IUS was a defendant in a claim brought by KPMG Consulting, Inc. (now known as BearingPoint, Inc.) on June 2, 2002 in the Circuit Court of the 11th Judicial Circuit. The claim alleges damages of approximately $15.8 million based on allegations of breach of contract and detrimental reliance on alleged promises that were not fulfilled. IUS asserted multiple defenses and counterclaims. Pursuant to the terms of the Purchase Agreement among the Company and SCT and its affiliates, SCT and those affiliates of SCT that were a party to the Purchase Agreement agreed to defend IUS against the claims in this suit and to indemnify the Company and IUS from all losses relating thereto. The parties have reached a settlement in which the Company has been released from all liabilities and is not required to make any payments.

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      On February 21, 2003, Integral Energy Australia brought a claim against IUS in the Supreme Court of New South Wales, Australia, relating to the implementation of IUS software. The amount of damages asserted against IUS is not determinable. Pursuant to the terms of the Purchase Agreement among the Company and SCT and its affiliates, SCT and those affiliates of SCT that were a party to the Purchase Agreement agreed to defend IUS against the claims in this suit and to indemnify the Company and IUS from all losses relating thereto.

      The Company has received an inquiry from the federal government requesting documents and employee interviews related to certain Department of Energy facilities with which the Company does business. The Company is cooperating fully with this inquiry. The Company has been made aware that this inquiry is the result of a qui tam complaint, which is currently under seal, against the Company relating to its billing practices at these facilities. Although the Company believes that it has meritorious defenses to the claims contained in this action and has defended them vigorously, the Company has reached a preliminary settlement with the federal government and the relator, subject to negotiation and execution of a final settlement agreement, under which the Company will pay $545,000. The full amount of this proposed settlement had been recorded as an accrued liability as of March 31, 2004. There has been and will be no factual finding or adjudication of wrongdoing by the Company as part of the proposed settlement. The Company has agreed to settle this matter without admission of fault or wrongdoing in order to avoid the uncertainty, inconvenience, distraction and expense of potentially protracted litigation. If for any reason the settlement is not finalized and this action is litigated, based upon information currently available to the Company and due to the inherent uncertainties of the litigation process, the Company is unable to predict the outcome of such claims or to determine whether an adverse outcome would have a material adverse effect on the Company’s financial condition or results of operations.

      From time to time, the Company is involved in other legal proceedings incidental to the conduct of its business. The outcome of these claims cannot be predicted with certainty. The Company intends to defend itself vigorously in these actions. However, any settlement or judgment may have a material adverse effect on the Company’s results of operations in the period in which such settlement or judgment is paid or payment becomes probable.

Item 4.     Submission of Matters to a Vote of Security Holders

      No matters were submitted to a vote of security holders of the Company during the fourth quarter of the fiscal year ended March 31, 2004.

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PART II

      The Company’s common stock, $.001 par value per share, is traded on the Nasdaq National Market under the symbol “IINT”. The following table sets forth the high and low sales prices of the Company’s common stock for the periods indicated:

      On June 7, 2004, there were 278 holders of record of our common stock. Because many of the Company’s shares are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.

      The Company has not declared or paid any cash dividends on its common stock and does not anticipate paying cash dividends in the foreseeable future. The Company anticipates that any future earnings will be retained to finance the continuing development of its business.

      On July 15, 1999, the Company’s Board of Directors approved a stock repurchase program for up to 2,000,000 shares of the Company’s outstanding common stock. The Company is authorized to use available cash to buy back its shares in open market transactions from time to time, subject to price and market conditions. No purchases were made in the period of 2001 through March 31, 2004. As of March 31, 2004, the Company held, as treasury stock, 435,500 shares that had been repurchased at a cost of $2.2 million under the program.

      In April 2002, the Company entered into an agreement with Robert Felton, a founder of the Company and former Chief Executive Officer and Chairman of the Board of Directors. Under this agreement, the Company repurchased 500,000 shares of the Company’s common stock from Mr. Felton at a price of $5.00 per share, which approximated market value at the time of the agreement, for an aggregate purchase price of $2.5 million. As part of this agreement, Mr. Felton agreed not to transfer or enter into any agreement to transfer the remainder of his shares of the Company’s stock for a period of one year. These repurchased shares are also held as treasury stock.

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Equity Compensation Plan Information

      The following table provides information about the common stock that may be issued under all of the Company’s existing equity compensation plans as of March 31, 2004.

*	All of the Company’s Equity Compensation Plans have been approved by its stockholders.

Recent Sales of Unregistered Securities

      On February 9, 2004, the Company completed a private placement to accredited investors under Section 506 of Regulation D, selling 5.0 million shares of its common stock, par value $0.001 per share at a price per share of $3.10. The net proceeds to the Company from the offering, after expenses, were approximately $14.4 million. The Company used the proceeds from this offering to replenish cash used in the acquisition of Wishbone Systems and will use the remaining proceeds for general working capital.

      The following selected consolidated financial data of the Company is qualified by reference to and should be read in conjunction with the consolidated financial statements and notes thereto and other financial information included elsewhere herein. The summary consolidated balance sheet data as of March 31, 2003 and 2004 and summary consolidated statements of operations data for the years ended December 31, 2001 and 2002, the three-month period ended March 31, 2003 and the year ended March 31, 2004 are derived from and qualified by reference to the audited consolidated financial statements of the Company, which are included elsewhere herein. The summary consolidated balance sheet data as of December 31, 1999, 2000, 2001 and 2002 and the summary consolidated statements of operations for the years ended December 31, 1999 and 2000 are derived from the audited consolidated financial statements of the Company which are not included herein, but have been previously filed with the SEC.

      In March 2003, the Company changed its fiscal year end from December 31 to March 31. Results from the twelve-month period ended March 31, 2003 were derived from Company’s published quarterly results and are unaudited. Accordingly, this twelve-month period is not disclosed in the accompanying consolidated financial statements. It is included in this selected financial data for comparative purposes only.

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(1)	Includes a $6.8 million write down of third-party software available for sale in 2000.

Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

      In addition to historical information, this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are not based on historical facts, but rather reflect management’s current expectations concerning future results and events. These forward-looking statements generally can be identified by the use of phrases and expressions such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” “likely,” “will” or other similar words or phrases. These statements, which speak only as of the date given, are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our expectations or projections. These risks include, but are not limited to, projected growth in the emerging service delivery management market, market acceptance of our service delivery management strategy, current market conditions for our products and services, our ability to achieve growth in our asset management and customer management offerings, market acceptance and the success of our new products and enhancements and upgrades to our existing products, the success of our product development strategy, our competitive position, the ability to establish and retain partnership arrangements, our ability to develop our indirect sales channels, the successful integration of the acquisition of Wishbone Systems, Inc. (“Wishbone Systems”) including the challenges inherent in diverting our management’s attention, our ability to realize anticipated or any synergies or cost-savings from the Wishbone Systems acquisition, changes in our executive management team, uncertainty relating to and the management of personnel changes, the ability to realize the anticipated benefits of our recent restructurings, timely development and introduction of new products, releases and product enhancements, current economic conditions, heightened security and war or terrorist acts in countries of the world that affect our business, and other risks identified in the section of this Report entitled “Description of Business — Factors Affecting Future Performance,” beginning on page 15. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date hereof. The Company undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements.

      In the MD&A and other sections that follow there will be references to the “MoD contract”. In the fourth quarter of 2000, the Company entered into a contract to provide the United Kingdom Ministry of Defense (“MoD”) with software, support and services. This contract generated 23.3% of revenue in 2001. In January 2002, the MoD announced it was suspending all work on the contract due to budgetary constraints. As a result of this suspension, the Company engaged in a significant restructuring effort in an attempt to right-size its work force and facilities.

Critical Accounting Policies

      Management’s discussion and analysis of the Company’s financial condition and results of operations is based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities,

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      The Company has identified the following policies as critical to the Company’s business operations and the understanding of the Company’s results of operations. Senior management has discussed the development and selection of these policies and the disclosures below with the Audit Committee of the Board of Directors. For a detailed discussion of the application of these and other accounting policies, see Note 1 in the Notes to Consolidated Financial Statements.

      Revenue recognition rules for software companies continue to evolve. They are very complex and often subject to interpretation. Very specific and detailed guidelines in measuring revenue are followed; however, certain judgments affect the application of the Company’s revenue policy. Revenue results are difficult to predict, and any shortfall in revenue or delay in recognizing revenue could cause operating results to vary significantly from quarter-to-quarter.

      Revenue arises from two sources: (a) software license fees and (b) services. Software license fees are generated from licensing the rights to use Indus software products. Services revenue is generated from sales of customer support services (maintenance contracts), consulting and implementation services, outsourcing, hosting services and training services for customers that license the Company’s products.

      For license arrangements that do not require modification of the software, revenue is recognized in accordance with accounting standards for software companies, including Statement of Position, or SOP, 97-2, “Software Revenue Recognition,” as amended or interpreted by SOP 98-4 and SOP 98-9, Technical Practice Aids, and SEC Staff Accounting Bulletins.

      License fee revenue is recognized when a non-cancelable license agreement becomes effective as evidenced by a signed contract, product delivery, a fixed or determinable license fee and probability of collection. If the license fee is not fixed or determinable, revenue is recognized as payments become due from the customer. If a nonstandard acceptance period is provided, revenue is recognized upon the earlier of customer acceptance or the expiration of the acceptance period.

      In arrangements that include rights to multiple software products and/or services, the total arrangement fee is allocated among each of the deliverables using the residual method, under which revenue is allocated to undelivered elements based on vendor-specific objective evidence (“VSOE”) of fair value of such undelivered elements and the residual amounts of revenue are allocated to delivered elements. Elements included in multiple element arrangements may consist of software products, maintenance (which includes customer support services and unspecified upgrades), hosting and consulting services. VSOE is based on the price generally charged when an element is sold separately or, in the case of an element not yet sold separately, the price established by authorized management, if it is probable that the price, once established, will not change when the element is sold separately. If VSOE does not exist for an undelivered element, the total arrangement fee will be taken to revenue over the life of the contract.

      Revenue from consulting and implementation services is generally time and material based and is recognized as the work is performed. Delays in project implementation will result in delays in revenue recognition. Some professional consulting services involve fixed-price and/or fixed-time arrangements and are recognized using contract accounting, which requires the accurate estimation of the cost, scope and duration of each engagement. Revenue and the related costs for these projects are recognized on the percentage-of-completion method, with progress-to-completion measured by using specific milestones, usually labor cost inputs, with revisions to estimates reflected in the period in which changes become known. Project losses are

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      Revenue from maintenance and support services is recognized ratably over the term of the support contract, typically one year.

      Revenue from outsourcing and web hosting (also referred to as “ASP” or application service provider) services is recognized based upon contractually agreed upon rates per user or service, over a contractually defined time period.

      Billed and unbilled accounts receivable are credit-based. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability or failure of its customers to make required payments. This allowance is formula-based, supplemented by an evaluation of specific accounts where there may be collectibility risk. If the methodology the Company uses to calculate this allowance does not properly reflect future collections, revenue could be overstated or understated. On an ongoing basis, the Company evaluates the collectibility of accounts receivable based upon historical collections and an assessment of the collectibility of specific accounts. The Company evaluates the collectibility of specific accounts using a combination of factors, including the age of the outstanding balance(s), evaluation of the account’s financial condition, recent payment history, and discussions with the Company’s account executive for the specific customer. Based upon this evaluation of collectibility, any increase or decrease required in the allowance for doubtful accounts is reflected in the period in which the evaluation indicates that a change is necessary. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The allowance for doubtful accounts was $4.4 million and $0.9 million as of March 31, 2003 and 2004, respectively. The reduction in the allowance from March 31, 2003 to March 31, 2004 is due to the write-off to the allowance of invoices related to a specific customer dispute and improved collections efforts in 2004. The amount written-off was fully included in the March 31, 2003 allowance for doubtful accounts.

      The Company generates a significant portion of revenues and corresponding accounts receivable from sales to companies in the utility industry. As of March 31, 2004, approximately $17.1 million, or 77.4%, of the Company’s gross billed accounts receivable were attributable to software license fees and services sales to utility customers. In determining the Company’s allowance for doubtful accounts, the Company has considered the financial condition of the utility industry as a whole, as well as the financial condition of individual utility customers. While the utility industry customers served by the Company are generally in the regulated or retail sector, their unregulated affiliated activities might affect the ability to collect amounts due. The credit status of customers is monitored and, where deemed necessary, a provision is made for potential uncollectibility.

      The Company generated 8.4% of its revenues in the year ended March 31, 2004 from a single customer, Magnox Electric plc, located in the United Kingdom. As of March 31, 2004, approximately $2.1 million, or 9.5%, of the Company’s accounts receivable were attributable to this customer. The Company does not anticipate accounts receivable collectibility issues related to this customer’s account.

      Revenue from sales denominated in currencies other than the U.S. Dollar resulted in approximately $5.5 million of the Company’s March 31, 2004 gross billed accounts receivable being denominated in foreign currencies, of which approximately $2.7 million were denominated in British Pounds. Historically, the foreign currency gains and losses on these receivables have not been significant, and the Company has determined that foreign currency derivative products are not required to hedge the Company’s exposure. If the value of the U.S. Dollar significantly declined versus one or more foreign currencies, the U.S. Dollar equivalents received from the Company’s customers could be significantly less than the March 31, 2004 reported amount. See additional discussion in “Quantitative and Qualitative Disclosures About Market Risks.”

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      The acquisition of Indus Utility Systems, Inc. (“IUS”) (formerly SCT Utility Systems, Inc.) in March 2003 and Wishbone Systems in January 2004 resulted in the recording of goodwill, which represents the excess of the purchase price over the fair value of assets acquired, as well as other definite-lived intangible assets.

      Under present accounting rules (SFAS No. 142), goodwill is no longer subject to amortization; instead it is subject to impairment testing criteria. Other acquired definite-lived intangible assets are being amortized over their estimated useful lives, although those with indefinite lives are not to be amortized but are tested at least annually for impairment, using a lower of cost or fair value approach. For purposes of its goodwill impairment testing, the Company considers itself to be a single reporting unit and assesses goodwill impairment on an enterprise-wide level. The impairment test is therefore performed on a consolidated basis and compares the Company’s market capitalization (reporting unit fair value) to its outstanding equity (reporting unit carrying value). In accordance with the recommended provisions of SFAS No. 142, the Company utilizes its closing stock price as reported on the Nasdaq National Market on the date of the impairment test in order to compute market capitalization. The Company has designated December 31 as the annual date for impairment testing.

      The Company performed its annual impairment test as of December 31, 2003 and concluded that no impairment of goodwill existed since the fair value of the Company’s reporting unit exceeded its carrying value. No events have occurred, nor circumstances changed subsequent to December 31, 2003, that would reduce the fair value of the Company’s reporting unit below its carrying value. The Company will continue to test for impairment on an annual basis or on an interim basis if circumstances change that would indicate the possibility of impairment. The impairment review may require an analysis of future projections and assumptions about the Company’s operating performance. If such a review indicates that the assets are impaired, an expense would be recorded for the amount of the impairment, and the corresponding impaired assets would be reduced in carrying value.

      Differences in the identification of reporting units and the use of valuation techniques can result in materially different evaluations of impairment.

      The Company has accrued the cost of redundant leased office space in San Francisco, Dallas and Pittsburgh through restructuring charges in the period January 1, 2000 through March 31, 2004. The accrual is included in the consolidated financial statements in “Other Accrued Liabilities” for amounts due within one year and “Other Liabilities” for amounts due after one year. The redundant office space was a result of the Company’s relocation of its headquarters and certain administrative functions from San Francisco to Atlanta in 2000 and 2001, and the suspension of the United Kingdom Ministry of Defense contract in 2002. Additions to the accrual were made in the year of 2002, the three-month period ended March 31, 2003 and the year ended March 31, 2004 due to additional vacated office space and the deterioration of the rental markets in all three locations. This deterioration has resulted in the Company receiving less than anticipated amounts in sublease arrangements due to lower lease rates and longer times taken to sublease the office space. The Company reviews this accrual and evaluates its adequacy on an ongoing basis. Should rental conditions deteriorate to the point where the redundant office space is not ever leased, the Company will incur additional charges totaling approximately $1.4 million over the period from fiscal year 2005 through 2008. Should rental conditions improve, it is possible that higher than anticipated sublease income will be generated. Any required increase or decrease in this accrual will be reflected in the period in which the evaluation indicates that a change is necessary.

      In May 2004, the Company announced its plan to restructure certain business activities and record restructuring charges of up to $11 million in the first quarter of fiscal 2005, as well as some incremental charges resulting from this restructuring plan in future periods. Of this amount, approximately $10 million relates to the consolidation of office space in Atlanta and San Francisco, including the transfer of functions to the company-owned office buildings in Columbia, South Carolina. The remaining restructuring charge is

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Results of Operations

      In fiscal 2004, the Company achieved operational growth from the March 2003 acquisition of IUS. The operations of Indus and IUS were combined in the succeeding months, with a merger of the IUS corporate subsidiary into Indus occurring in November 2003. During the period since acquisition, many of the operations of Indus and IUS have been combined in such a manner that it is not always practicable to attribute and/or quantify variances specific to either entity in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Additionally, in January 2004, the Company acquired the operations of Wishbone Systems to expand the Company’s product offerings into a comprehensive suite of service delivery management applications. Wishbone System’s operations had an insignificant impact on the Company’s operations in fiscal 2004.

      In March 2003, the Company changed its fiscal year end from December 31 to March 31. The following discussion of historical operating results compares the fiscal year ended March 31, 2004 to the same twelve-month period in the prior year. Results from the twelve-month period ended March 31, 2003 were derived from the Company’s published quarterly results and are unaudited. Accordingly, this twelve-month period is not disclosed in the accompanying consolidated financial statements. It is included in this discussion for comparative purposes only. For the previous fiscal year, ended December 31, 2002, the comparison is to the fiscal year ended December 31, 2001.

Revenue

      The Company’s revenue is derived from software license fees and from services, which include customer support, consulting, outsourcing and hosting. The increase in total revenue is principally attributable to revenue generated by the IUS business acquired in March 2003, although the merger of the operation makes quantifying the actual amounts fully attributable to the IUS operations impracticable. Not withstanding the increase in revenue in fiscal year 2004, the Company continues to experience some effects from a weakened spending environment for information technology in the form of deferred buying decisions by customers for major software and services purchases and pressures from customers and competitors to discount offerings.

      Software license fees: The increase in revenue from software license fees in the year ended March 31, 2004 is attributable to the increase in new license arrangements during the current year and the recognition of $9.2 million in revenue, deferred from periods prior to the beginning of the year, where the criteria for revenue recognition was met during the current year.

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      The aggregate dollar totals of new license arrangements increased 56.6% to $20.2 million in the twelve-month period ended March 31, 2004 from $12.9 million for the same period of 2003. License fee revenue from the CRM software suites was $3.7 million for the year ended March 31, 2004. All of the license fee revenue for the prior year period was derived from EAM software, because the CRM software was acquired in the IUS acquisition and no CRM-related license revenue was recorded in the twelve-month period ended March 31, 2003.

      Support, outsourcing and hosting: Revenues from support, outsourcing and hosting increased in the 2004 period due to a $3.1 million growth in hosting revenue, $7.6 million from the inclusion of the outsourcing business and increased customer support from the IUS business acquired in March 2003.

      Consulting, training and other: The increase in revenue from consulting, training and other is attributable to the inclusion of $32.4 million from the IUS business in 2004. This revenue was offset by the decline in the Company’s EAM consulting business resulting from lower levels of new license bookings in fiscal 2003 and into 2004, which directly impacted consulting services, and the winding down of several significant projects.

Cost of Revenue