<PAGE>
 
                                   FORM 10-Q
                                        
                      SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC 20549
                                        
       (Mark One)

           [ X ]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
                   For the quarter ended September 30, 1998

                                      OR

           [   ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
                   For the transition period from __________ to __________

                        COMMISSION FILE NUMBER 0-21040


                         CAMBRIDGE TECHNOLOGY PARTNERS
                             (MASSACHUSETTS), INC.
            (Exact name of registrant as specified in its charter)



               DELAWARE                             06-1320610
     (State or other jurisdiction of             (I.R.S. Employer
      incorporation or organization)          Identification Number)


          304 VASSAR STREET,
      Cambridge, Massachusetts                         02139
(Address of principal executive offices)            (Zip Code)

                                (617) 374-9800
             (Registrant's telephone number, including area code)


     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   X    No  ___
                                                  -----         

     Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:

     As of September 30, 1998, there were 58,560,140 shares of common stock
outstanding.
 
<PAGE>
 
              CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
                                        
                               TABLE OF CONTENTS
                               -----------------


PART I - FINANCIAL INFORMATION:
 
ITEM 1: FINANCIAL STATEMENTS
 
  Consolidated Balance Sheets as of September 30, 1998 and
    December 31, 1997                                                      3
 
  Consolidated Statements of Operations for the Three and
    Nine Months Ended September 30, 1998 and 1997                          4
 
  Consolidated Statements of Cash Flows for the Nine
    Months Ended September 30, 1998 and 1997                               5
 
  Notes to Consolidated Financial Statements                               6
 
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        CONDITION AND RESULTS OF OPERATIONS                                11
 
PART II - OTHER INFORMATION:
 
Item 2: CHANGES IN SECURITIES AND USE OF PROCEEDS                          21
 
Item 6: EXHIBITS AND REPORTS ON FORM 8-K                                   21
 
SIGNATURES                                                                 22
 
EXHIBIT INDEX                                                              23

                                       2
<PAGE>
 
 PART I - FINANCIAL INFORMATION
  Item 1.  Financial Statements
  -------  --------------------

              CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
                          CONSOLIDATED BALANCE SHEETS
                (in thousands, except share and per share data)
<TABLE>
<CAPTION>
 
                                                                       September 30,   December 31,
                                                                            1998           1997
                                                                       --------------  -------------
                                                                         (unaudited)
<S>                                                                    <C>             <C>
ASSETS
Current assets:
 Cash and cash equivalents                                                  $ 64,339       $ 39,649
 Investments held to maturity                                                 24,112         15,824
 Accounts receivable, less allowance of $4,312 and $2,757
   at September 30, 1998 and December 31, 1997, respectively                 138,469        105,206
 Unbilled revenue on contracts                                                15,784          9,048
 Deferred income taxes                                                           950            950
 Prepaid expenses and other current assets                                    30,477         27,878
                                                                            --------       --------
   Total current assets                                                      274,131        198,555
 
Property and equipment, net                                                   46,632         36,027
Other assets                                                                   8,719          5,745
Goodwill, net                                                                  1,480          2,094
                                                                            --------       --------
   Total assets                                                             $330,962       $242,421
                                                                            ========       ========
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable                                                           $ 20,180       $ 19,134
 Accrued expenses                                                             49,650         40,018
 Deferred revenue                                                             13,977          9,502
 Income taxes payable                                                         24,709         19,361
 Obligations under capital leases, current                                       144            207
 Other current liabilities                                                         -          2,032
                                                                            --------       --------
   Total current liabilities                                                 108,660         90,254
 
Obligations under capital leases                                                 235            377
Deferred income taxes                                                            923            923
 
Commitments and contingencies
 
Stockholders' equity:
 Common stock, $.01 par value, authorized 250,000,000
   shares; issued and outstanding 58,560,140 and 56,649,420 shares
   at September 30, 1998 and December 31, 1997, respectively                     586            567
 Additional paid-in capital                                                  111,664         75,400
 Retained earnings                                                           111,300         77,361
 Accumulated other comprehensive loss                                         (2,406)        (2,461)
                                                                            --------       --------
   Total stockholders' equity                                                221,144        150,867
                                                                            --------       --------
   Total liabilities and stockholders' equity                               $330,962       $242,421
                                                                            ========       ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.

                                       3
<PAGE>
 
              CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (in thousands, except per share data)
                                  (unaudited)
<TABLE>
<CAPTION>
 
                                               Three Months Ended September 30,    Nine Months Ended September 30,
                                               --------------------------------    -------------------------------
                                                   1998                1997            1998               1997
                                               -----------         ------------    ------------       ------------
<S>                                            <C>                 <C>             <C>              <C>
 
Net revenues                                    $ 153,074            $ 117,029      $ 451,875          $ 309,559
Costs and expenses:
  Project personnel                                68,272               54,127        205,659            143,117
  General and administration                       16,806               12,469         50,358             34,564
  Sales and marketing                              13,794               10,739         42,824             28,624
  Other costs                                      31,971               23,124         88,608             58,573
  Business combination costs                        8,400                    -          8,400                  -
                                               -----------         ------------    ------------       ------------
     Total operating expenses                     139,243              100,459        395,849            264,878
                                               -----------         ------------    ------------       ------------
 
Income from operations                             13,831               16,570         56,026             44,681
 
Other income, net                                     990                  515          1,901              1,403
                                               -----------         ------------    ------------       ------------
 
Income before income taxes                         14,821               17,085         57,927             46,084
Provision for income taxes                          5,146                6,633         22,238             18,134
                                               -----------         ------------    ------------       ------------
 
Net income                                       $  9,675             $ 10,452       $ 35,689           $ 27,950
                                               ===========         ============    ============       ============
 
Basic net income per share                       $   .17              $    .19       $    .62           $    .52
                                               ===========         ============    ============       ============
 
Diluted net income per share                     $   .16              $    .17       $    .57           $    .46
                                               ===========         ============    ============       ============
 
Weighted average number of
 common shares outstanding                        58,410               54,894          57,846             54,270
                                               ===========         ============    ============       ============

Weighted average number of
 common and common
 equivalent shares outstanding                    61,895               61,244          62,348             60,327
                                               ===========         ============    ============       ============

</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

                                       4
<PAGE>
 
              CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (in thousands)
                                  (unaudited)
<TABLE>
<CAPTION>
 
                                                            Nine Months Ended September 30,
                                                            --------------------------------
                                                                1998                1997
                                                            ------------       ------------- 
<S>                                                         <C>                <C>
 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                     $ 35,689           $ 27,950
Amounts that reconcile net income to net cash provided
 by operating activities:
 Depreciation and amortization                                   10,040              6,476
 Tax benefit from exercise of stock options                      11,265              8,900
 Gain on equity investment                                         (433)                 -
 Changes in assets and liabilities:
   Increase in accounts receivable                              (32,845)           (33,254)
   Increase in unbilled revenue on contracts                     (6,547)            (2,284)
   Increase in prepaid expenses and other current assets         (3,862)            (7,568)
   Increase in accounts payable                                     936              7,874
   Increase in accrued expenses                                   8,273             12,220
   Increase in deferred revenue                                   4,488              4,099
   Increase in income taxes payable                               5,239              4,451
   Other, net                                                       200             (1,674)
                                                            ------------       ------------- 
     Net cash provided by operating activities                   32,443             27,190
                                                            ------------       ------------- 

CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment                             (19,809)           (17,174)
Investment in Cambridge Technology Capital Fund I                (1,289)                 -
Purchase of investments held to maturity                        (23,733)           (15,107)
Maturity of investments                                          15,445             12,583
                                                            ------------       ------------- 
     Net cash used for investing activities                     (29,386)           (19,698)
                                                            ------------       ------------- 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
(Repayment) / proceeds of loan                                     (823)               808
Obligations under capital leases                                   (158)               (61)
Dividend distribution                                            (1,186)            (2,323)
Proceeds from employee stock purchase plan                        7,222              4,914
Proceeds from exercise of stock options                          16,047              8,787
                                                            ------------       ------------- 
     Net cash provided by financing activities                   21,102             12,125
                                                            ------------       ------------- 
 
Effect of foreign exchange rate changes on cash                     531               (389)
 
Net increase in cash and cash equivalents                        24,690             19,228
Cash and cash equivalents at beginning of period                 39,649             26,456
                                                            ------------       ------------- 
Cash and cash equivalents at end of period                     $ 64,339           $ 45,684
                                                            ============       =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.

                                       5
<PAGE>
 
              CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (unaudited)

A.  BASIS OF REPORTING
    ------------------

The accompanying consolidated financial statements of Cambridge Technology
Partners (Massachusetts), Inc. (the "Company") include the accounts of the
Company and all of its wholly owned subsidiaries.  All significant intercompany
transactions and balances have been eliminated in consolidation.  In August
1998, the Company acquired all of the outstanding capital stock of Excell Data
Corporation ("Excell") (see Note B).  The Excell acquisition was accounted for
using the pooling of interests method of accounting.  In November 1997, the
Company acquired all of the outstanding capital stock of Peter Chadwick Holdings
Limited ("Peter Chadwick").  The acquisition of Peter Chadwick was accounted for
using the pooling of interests method of accounting. All prior period historical
consolidated financial statements presented herein have been restated to include
the financial position, results of operations, and cash flows of Excell and
Peter Chadwick.  Certain prior period amounts have been reclassified to conform
to current period presentation.  In the opinion of management, the consolidated
financial statements reflect all normal and recurring adjustments, which are
necessary for a fair presentation of the Company's financial position, results
of operations, and cash flows as of the dates and for the periods presented.
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Consequently, these statements do not include all the disclosures normally
required by generally accepted accounting principles for annual financial
statements nor those normally made in the Company's Annual Report on Form 10-K.
Accordingly, reference should be made to the Company's Annual Report on Form 
10-K and the Company's registration statement on Form S-3 filed on September 30,
1998 for additional disclosures, including a summary of the Company's accounting
policies.  The consolidated results of operations for the three and nine months
ended September 30, 1998 are not necessarily indicative of results for the 
full year.

B.  ACQUISITION
--  -----------

On August 31, 1998, the Company acquired all of the outstanding capital stock of
Excell. This acquisition was accomplished through a merger of the Company's
acquisition subsidiary and Excell in an exchange of 1,680,416 shares of the
Company's common stock for all outstanding shares of capital stock of Excell.
The acquisition has been accounted for using the pooling of interests method of
accounting.  Founded in 1991, Excell had approximately 510 employees at the time
of the acquisition and had locations in Bellevue, Washington, Portland, Oregon,
and Denver, Colorado. Direct transaction costs, which consist primarily of
investment banking fees, accounting fees, legal fees, and business integration
costs, related to this acquisition approximated $1.7 million and are included in
business combination costs in the accompanying consolidated statements of
operations for the periods ended September 30, 1998 (also see Note H).

C.  REVOLVING CREDIT FACILITY
--  -------------------------

In September 1998, the Company obtained a $50.0 million unsecured senior
revolving credit facility (the "Facility") through a syndication arrangement
committed equally by The Chase Manhattan Bank ("Chase") and Fleet National Bank.
The Facility expires on September 10, 2001 and replaces the Company's previously
maintained $20.0 million revolving credit facility that

                                       6
<PAGE>
 
expired on June 30, 1998. The Facility is administered by Chase and carries a
commitment fee, payable quarterly in arrears, calculated based on the unused
portion of the Facility and a price grid as set forth in the credit agreement.
The Facility permits the Company to elect any of three possible interest rate
formulas as defined in the credit agreement. Interest is payable in arrears
based on an interest period determined by the interest rate elected by the
Company. The Facility requires, among other things, the Company to maintain
certain financial ratios, including debt service coverage, debt to capital, and
net worth. At September 30, 1998, the Company was in compliance with these
financial ratio requirements. As of September 30, 1998 and December 31, 1997,
the Company had no balance outstanding under its revolving credit facilities.

D.   OTHER CURRENT LIABILITIES
     -------------------------

In April 1997, Peter Chadwick acquired the assets of a training facility located
in the United Kingdom.  Peter Chadwick entered into a loan agreement with
National Westminister Bank (the "Loan Agreement") to finance this acquisition.
In March 1998, the Company terminated this Loan Agreement and repaid the
outstanding principal balance of approximately $823,000.

E.  NET INCOME PER SHARE
    --------------------

The Company adopted Statement of Financial Accounting Standard No. 128,
"Earnings per Share," ("SFAS 128") beginning with the year ended December 31,
1997, which includes retroactively restating earnings per share for all prior
periods for which earnings per share ("EPS") data is presented.  SFAS 128
requires the presentation of basic and diluted EPS. Basic net income per share
is computed by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period.  Diluted net income
per share is computed using the weighted average number of common shares
outstanding plus the dilutive effect of common stock equivalents (using the
treasury stock method).  For the three and nine month periods ended September
30, 1998, outstanding options to purchase approximately 2.9 million and 2.8
million shares, respectively, were excluded from the computation of diluted EPS
because the effects of these option shares were anti-dilutive.  The following
table presents the calculation of earnings per share for the three and nine
months ended September 30, 1998 and 1997 (in thousands except per share data):
<TABLE>
<CAPTION>
 
                                    Three Months Ended     Nine Months Ended
                                    ------------------     -----------------
                                      1998      1997         1998     1997
                                    --------  --------     -------- -------- 
<S>                                 <C>      <C>           <C>      <C> 
Net income                          $  9,675  $ 10,452     $ 35,689 $ 27,950
                                    ========  ========     ======== ========
Basic:
 Weighted average common
   shares outstanding                 58,410    54,894       57,846   54,270
                                    ========  ========     ======== ========
 Net income per share               $    .17  $    .19     $    .62 $    .52
                                    ========  ========     ======== ========
Diluted:
 Weighted average common
   shares outstanding                 58,410    54,894       57,846   54,270
 Dilutive effects of stock options
    and warrants                       3,485     6,350        4,502    6,057
 Weighted average common and
   common equivalent shares
   outstanding                      --------  --------     -------- -------- 
                                      61,895    61,244       62,348   60,327
                                    ========  ========     ======== ========
 Net income per share               $    .16  $    .17     $    .57 $    .46
                                    ========  ========     ======== ========
</TABLE>

                                       7
<PAGE>
 
During the period from April 1, 1996 through August 31, 1998 (the date of the
Company's acquisition of Excell), Excell elected to be treated as an S-
Corporation for income tax reporting purposes.  Under this election, Excell's
individual stockholders are deemed to have received a pro rata distribution of
taxable income of Excell (whether or not an actual distribution was made), which
is included in each stockholder's taxable income.  Accordingly, Excell did not
provide for income taxes during the period from April 1, 1996 through August 31,
1998.  Excell's S-Corporation tax reporting status was terminated on the date of
acquisition and the undistributed earnings of Excell totaling $1.8 million, as
of August 31, 1998, were reclassifed to additional paid-in-capital.  Pro forma
net income per share data is presented below to reflect the pro forma increase
to historical income taxes related to Excell, as if Excell was a C-Corporation
for tax reporting purposes for the periods presented (in thousands, except per
share data).
<TABLE>
<CAPTION>
 
                                           Three Months Ended September 30,   Nine Months Ended September 30,
                                           --------------------------------   -------------------------------
                                               1998               1997             1998             1997
                                           ------------       -------------   ------------     --------------  
<S>                                        <C>                <C>             <C>             <C>
Pro forma data:
 Historical income before income taxes       $ 14,821            $ 17,085       $  57,927         $  46,084
 Provision for income taxes:
   Historical income taxes                      5,146               6,633          22,238            18,134
   Pro forma increase to
     historical income taxes                       37                 224             195               399
                                           ------------       -------------   ------------     --------------  
 Pro forma net income                        $  9,638            $ 10,228       $  35,494          $ 27,551
                                           ============       =============   ============     ==============

 Pro forma basic net income per share        $    .17            $    .19       $     .62          $    .51
                                           ============       =============   ============     ==============
 Pro forma diluted net income per share      $    .16            $    .17       $     .57          $    .46
                                           ============       =============   ============     ==============

 Weighted average number of
   common shares outstanding                   58,410              54,894          57,846            54,270
                                           ============       =============   ============     ==============
 
 Weighted average number of
   common and common equivalent
     shares outstanding                        61,895             61,244           62,348            60,327
                                           ============       =============   ============     ==============
</TABLE>

F.  FOREIGN EXCHANGE CONTRACTS
    --------------------------

The Company maintains foreign exchange contracts to mitigate the risk of changes
in foreign exchange rates associated with intercompany balances.  The contracts
generally have maturities of one month.  The impact of exchange rate movements
on contracts is recorded in other income in the period in which the exchange
rates change, generally consistent with the term of the contract.  As of
September 30, 1998, the Company held foreign exchange forward contracts of
approximately $8.2 million and there were no related deferred gains and losses.
The Company does not hold foreign exchange contracts for trading purposes.

G.  COMPREHENSIVE INCOME
    --------------------

The Company has adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS 130").  SFAS 130 requires the
presentation of comprehensive income and its components.  Comprehensive income
presents a measure of all changes in equity that result from recognized
transactions and other economic events during the period other than transactions
with stockholders.  SFAS 130 requires restatement of all prior period financial
statements presented and is effective for periods beginning after December 15,
1997.  The Company has elected to disclose this information in its annual
Statement of Stockholders' Equity.

                                       8
<PAGE>
 
The following table presents the calculation of comprehensive income and its
components for the three and nine months ended September 30, 1998 and 1997 (in
thousands):

<TABLE>
<CAPTION>
 
                                    Three Months Ended     Nine Months Ended
                                    ------------------     -----------------
                                      1998      1997         1998     1997
                                    --------  --------     -------- -------- 
<S>                                 <C>      <C>           <C>      <C>  
 
 Comprehensive income:
   Net income                       $ 9,675   $ 10,452     $ 35,689 $ 27,950
   Foreign currency translation
     adjustments                      1,491        (69)          55   (2,093)
                                    --------  --------     -------- -------- 
   Comprehensive income             $11,166   $ 10,383     $ 35,744 $ 25,857
                                    ========  ========     ======== ========
</TABLE>

H.  EXCELL PHANTOM STOCK PLAN
    -------------------------

Excell maintained a 1996 Class I Phantom Stock Plan ("Phantom Plan") under which
Excell granted nonqualified phantom stock units to qualifying employees.  The
Phantom Plan entitled a holder to surrender the units for cash equal to the
defined per-unit amount derived from net income of Excell over the holding
period of the units.  The Phantom Plan also provided for a five-year vesting
period along with other restrictions regarding redemption.  The Phantom Plan
also contained provisions related to payments to holders of units based on a
defined market value if Excell was sold or a major change in ownership
(collectively "change in control") occurred, as defined under the Phantom Plan
agreement.  The acquisition of Excell by the Company qualified as a change in
control under the Phantom Plan.  As a result, upon consummation of the
acquisition, the Company recorded a charge to operations of $6.7 million in the
quarter ended September 30, 1998, included in business combination costs,
representing amounts owed to Phantom Plan participants as of the closing.  In
accordance with the Phantom Plan, as a result of the acquisition, the Phantom
Plan was terminated.

I.  NEW ACCOUNTING PRONOUNCEMENTS
    -----------------------------

In March 1998, Statement of Position 98-1, "Accounting for the Cost of Computer
Software Developed or Obtained for Internal Use" ("SOP 98-1"), was issued.  
SOP 98-1 provides guidance on applying generally accepted accounting principles
in addressing whether and under what condition the costs of internal-use
software should be capitalized. SOP 98-1 is effective for transactions entered
into in fiscal years beginning after December 15, 1998, however earlier adoption
is encouraged. The Company adopted the guidelines of SOP 98-1 as of January 1, 
1998.

In July 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"), which is effective for fiscal
years beginning after December 15, 1997.  Interim reporting disclosures are not
required in the first year of adoption.  SFAS 131 specifies revised guidelines
for determining an entity's operating segments and the type and level of
financial information to be disclosed.  SFAS 131 changes current practice under
SFAS 14 by establishing a new framework on which to base segment reporting and
expands the required disclosures for each segment.  The Company will adopt 
SFAS 131 in the fourth quarter of 1998 and is currently determining the impact
of such adoption on its reporting as currently presented.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133").

                                       9
<PAGE>
 
SFAS 133 is effective for all fiscal quarters of all fiscal years beginning
after June 15, 1999 (January 1, 2000 for the Company). SFAS 133 requires that
all derivative instruments be recorded on the balance sheet at their fair value.
Changes in the fair value of derivatives are recorded for each period in current
earnings or other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction and, if it is, the type of hedge
transaction. The Company is currently determining the impact of the adoption of
SFAS 133 on the Company's results of operations and financial position.

                                       10
<PAGE>
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-------  -----------------------------------------------------------
         AND RESULTS OF OPERATIONS
         -------------------------

OVERVIEW

Cambridge Technology Partners (Massachusetts), Inc. (the "Company") is an
international management consulting and systems integration firm.  The Company
combines management consulting, information technology ("IT") strategy, process
innovation and implementation, custom and package software deployment, network
services, and educational services to rapidly deliver end-to-end business
solutions for clients. In performing its services, the Company employs a rapid
development methodology that features an iterative approach and conducts
facilitated workshops that bring together key client users, executives, and IT
professionals to achieve consensus on the business case, strategic objectives,
and functionality of a business solution.  The Company believes that this
approach permits the delivery of results in unprecedented time frames, typically
within three to twelve months. Net revenues for the third quarter of 1998
increased 31% to $153.1 million compared to $117.0 million for the same period
in 1997.  Excluding business combination costs of $8.4 million related to the
acquisition of Excell Data Corporation ("Excell") in August 1998 (see Notes B
and H of Notes to Consolidated Financial Statements), net income for the quarter
ended September 30, 1998 increased 47% to $15.4 million, or $.25 per share
(diluted), compared to $10.5 million, or $.17 per share (diluted), for the
comparable period in 1997.  Giving effect to the business combination costs, net
income for the quarter ended September 30, 1998 was $9.7 million, or $.16 per
share (diluted).

In August 1998, the Company acquired all of the outstanding capital stock of
Excell.  This acquisition was accomplished through a merger of the Company's
acquisition subsidiary and Excell in an exchange of 1,680,416 shares of the
Company's common stock for all outstanding shares of capital stock of Excell.
The acquisition has been accounted for using the pooling of interests method of
accounting.  Founded in 1991, Excell had approximately 510 employees at the time
of the acquisition and had locations in Bellevue, Washington, Portland, Oregon,
and Denver, Colorado. This acquisition augmented the Company's existing
Microsoft-centric service capabilities, expanded the Company's network services
business, and increased the Company's geographic reach in the domestic Northwest
region.

North American net revenues grew 23% for the quarter ended September 30, 1998
compared to the same period in 1997.   Internationally, net revenues grew 51% in
the third quarter of 1998 compared to the same period a year ago.  The
international revenue growth resulted from continuing demand for the Company's
services, primarily in Europe, including management consulting services, custom
and package client/server applications, and interactive solutions.
Additionally, net revenues from the Company's Asia Pacific and Latin American
operations accounted for 4% of consolidated net revenues in the quarter ended
September 30, 1998, compared to 2% for the same period in 1997.

While the Company's net revenues continued to grow domestically and
internationally in the third quarter of 1998, the Company experienced downward
pressure in its North American Rapid Application Deployment ("RAD") business.
The lower rate of revenue growth in the Company's North American RAD business
was principally due to three factors: (1) an increased number of clients opting
to defer or cancel strategic IT initiatives in favor of completing Year 2000
remediation activities; (2) increased competition in specialty solution areas;
and (3) a decline

                                       11
<PAGE>
 
in the Company's new business win rates and project transition rates due in part
to clients entering annual budgeting cycles.

The Company recently combined its North America-based Enterprise Resource
Solutions and RAD strategic business units into a new North American strategic
business unit.  The Company believes that the formation of this new North
American strategic business unit achieves two objectives.  First, it integrates
the Company's front- and back-office delivery capabilities to help provide
clients with integrated IT service offerings and a single point of client
contact.  This should enhance the development of long-term client relationships.
Second, the Company is organizing the new North American strategic business unit
around its major service lines, including custom support solutions, customer
management solutions, educational services, interactive solutions, network
services, and enterprise resource solutions. The Company believes that this
service line structure should enable the Company to provide its clients with a
more focused service approach.

In order to support continuing demand for the Company's services, total company
headcount increased to 4,299 at September 30, 1998, from 3,496 at December 31,
1997.  The Company will continue to focus on hiring and assimilating appropriate
personnel to service its clients.  While the Company's employee turnover
remained at an annualized rate of over 20% for 1998, the Company does not expect
employee turnover to have a detrimental impact on the Company's ability to meet
its growth goals.  The Company is continuing to hire in accordance with its
current and anticipated demand requirements and has implemented a number of
employee appreciation and benefit programs to retain and attract existing and
new employees.

As part of its global expansion plans, the Company added offices, during the
third quarter of 1998, in Denver, CO, and Portland, OR, in the United States,
and Sydney, Australia, and Munich, Germany, bringing worldwide total office
count to 53 locations at September 30, 1998.


RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 1998, COMPARED TO
  THREE MONTHS ENDED SEPTEMBER 30, 1997

Net revenues increased 31% to $153.1 million in 1998 compared to $117.0 million
in 1997 due principally to an increase in the volume of services delivered to
new clients, leveraging the existing client base by undertaking additional
projects, and continuing demand for the Company's expanded service offerings.
North American net revenues grew 23% to $105.0 million in 1998 from $85.2
million in 1997.  International net revenues grew 51% to $48.1 million in 1998
from $31.8 million in 1997.

Project personnel costs consist principally of payroll and payroll related
expenses for personnel dedicated to client assignments and are directly related
to the level of client services being delivered.  Project personnel costs were
$68.3 million or 45% of net revenues in 1998 compared to $54.1 million or 46% of
net revenues in 1997.  The dollar increase resulted from the hiring of
additional project personnel over 1997 staff levels to support the increased
volume of services delivered to clients, the related increase in payroll and
payroll related expenses, and an increase in subcontractor costs.  This dollar
increase was partially offset by a decrease in variable compensation levels
related to the Company's bonus compensation plan, which was the primary

                                       12
<PAGE>
 
factor contributing to the decrease in project personnel costs as a percentage
of net revenues. Worldwide project personnel headcount increased 28% to 3,463
employees at September 30, 1998 from 2,714 employees at September 30, 1997.
While the Company anticipates meeting its hiring goals for the remainder of
fiscal 1998, competition for personnel with IT skills is intense and the Company
expects salaries and wages to continue to increase. The Company periodically
reviews and updates its billing rates to cover the expected increase in costs.

General and administration expenses were $16.8 million in 1998 compared to $12.5
million in 1997, representing 11% of net revenues for both periods.  The dollar
increase primarily reflects increased payroll and payroll related expenses
associated with increased staff headcount and increased facilities, travel, and
legal expenses to support the Company's continued growth and geographic
expansion in North America and internationally, partially offset by a decrease
in variable compensation levels and recruiting and relocation expenses.

Sales and marketing expenses were $13.8 million in 1998 compared to $10.7
million in 1997, reflecting 9% of net revenues for both periods.  The dollar
increase is primarily attributable to an increase in payroll and payroll related
expenses associated with the increase in sales and marketing personnel from 206
at September 30, 1997 to 279 at September 30, 1998, partially offset by a
decrease in variable compensation levels. The increased headcount enables the
Company to generate client leads through its regional field marketing staff with
subsequent services coordinated by its sales personnel. The dollar increase also
resulted from increased marketing events and publications in order to provide
existing and potential clients with essential information about the Company and
its existing and new service offerings. The Company continued its investment in
marketing initiatives and educational and training programs through those
conducted by its Management Lab and the Cambridge Information Network (CIN). The
Management Lab and CIN enable clients to participate in both physical and
virtual interactive forums to discuss issues associated with adopting advanced
information technology, as well as key business, technology, and career
management issues.

Other costs consist of non-billable expenses directly incurred for client
projects and other associated business costs, including facilities costs and
related expenses, non-billable staff travel, and non-billable project personnel
costs.  Other costs were $32.0 million or 21% of net revenues in 1998 compared
to $23.1 million or 20% of net revenues in 1997.  The dollar and percentage
increase from 1997 resulted principally from a decrease in project personnel
utilization (which results in increased non-billable project personnel costs)
and increased  facility, travel, and employee training costs. The decrease in
project personnel utilization is primarily due to the downward pressure on the
Company's North American RAD revenues.  The Company has adjusted its hiring
plans to reflect the reduced North American RAD revenue growth rate and will
continue to monitor its staffing needs based on critical skills and demand
requirements.

Direct transaction costs, which consisted primarily of investment banking fees,
accounting fees, legal fees, and business integration costs, related to the
acquisition of Excell, approximated $1.7 million and are included in business
combination costs in the accompanying consolidated statements of operations for
the periods ended September 30, 1998.  Additionally, the acquisition of Excell
by the Company qualified as a change in control under an Excell  Phantom Stock
Plan.  As a result, upon consummation of the acquisition, the Company recorded a
charge to operations of $6.7 million for the period ended September 30, 1998,
included in business combination costs, representing amounts owed to Excell
Phantom Stock Plan participants as of the closing. In 

                                       13
<PAGE>
 
accordance with the Excell Phantom Stock Plan, as a result of the acquisition,
the Excell Phantom Stock Plan was terminated (see Note H of Notes to
Consolidated Financial Statements).

Other income of $990,000 in 1998 included interest income of $622,000 and a
$514,000 gain from the Company's investment in Cambridge Technology Capital Fund
I, partially offset by foreign currency exchange rate loss and other interest
expense totaling $146,000.  Other income in 1997 of $515,000 consisted of
interest income of $632,000, partially offset by foreign currency exchange rate
loss and other interest expense totaling $117,000.

The Company maintains monthly foreign exchange forward contracts to hedge
against the risk of changes in foreign exchange rates associated with
intercompany balances.  This risk coverage is dependent upon forecasted
intercompany activities at the beginning of each month.  The exchange rate gains
and losses are directly related to the accuracy of such forecasted amounts.  As
of September 30, 1998, the Company held foreign exchange contracts of
approximately $8.2 million.

The Company's effective income tax rate for the third quarter of 1998 was 34.7%
compared to 38.8% for the same period a year ago.  The decrease in the Company's
effective tax rate in the third quarter of 1998 is primarily due to favorable
effects of state tax rate minimization initiatives put in place in the second
half of 1997 and continuing into 1998 and favorable global tax planning
strategies.  The Company's effective tax rate may vary from period to period
based on the Company's future expansion into areas of varying country, state,
and local statutory income tax rates and its geographic mix of revenue and
income.

Net income, excluding business combination costs of $8.4 million related to the
Excell acquisition, increased 47% to $15.4 million or $.25 per share (diluted)
for the 1998 period as compared to $10.5 million or $.17 per share (diluted) for
the same period in 1997.  Giving effect to the $8.4 million business combination
costs, net income for the quarter ended September 30, 1998 was $9.7 million, or
$.16 per share (diluted).

NINE MONTHS ENDED SEPTEMBER 30, 1998, COMPARED TO
  NINE MONTHS ENDED SEPTEMBER 30, 1997

Net revenues increased 46% to $451.9 million in 1998, compared to $309.6 million
in 1997 due principally to an increase in the volume of services delivered to
new clients, leveraging the existing client base by undertaking additional
projects, and continuing demand for the Company's expanded service offerings.
North American net revenues grew 44% to $316.3 million in 1998 from $219.5
million in 1997.  International net revenues grew 51% to $135.6 million in 1998
from $90.1 million in 1997.

Project personnel costs were $205.7 million in 1998 and $143.1 million in 1997,
or 46% of net revenues for both periods. The dollar increase primarily resulted
from the hiring of additional project personnel over 1997 staff levels to
support the increased volume of services delivered to clients and the related
increase in payroll and payroll related expenses.  Average worldwide project
personnel for the nine-month period ended September 30, 1998 increased 28% from
the comparable period in 1997.

General and administration expenses were $50.4 million in 1998 compared to $34.6
million in 1997, representing 11% of net revenues for both periods.  The dollar
increase primarily reflects

                                       14
<PAGE>
 
expenses associated with increased staff headcount and an increase in facilities
costs to support the Company's continued growth and geographic expansion in
North America and internationally, partially offset by a decrease in variable
compensation levels. Average worldwide general and administration personnel for
the nine-month period ended September 30, 1998 increased 41% from the comparable
period in 1997.

Sales and marketing expenses were $42.8 million in 1998 compared to $28.6
million in 1997, reflecting 9% of net revenues for both periods.  The dollar
increase is primarily attributable to an increase in payroll and payroll related
expenses associated with a 35% increase in average sales and marketing personnel
in the first nine months of 1998, compared to the same period in 1997, the
increase in sales commissions related to the significant increase in net
revenues, facility costs, and travel related expenses for the field sales and
marketing groups. This increased headcount enables the Company to generate
client leads through its regional field marketing staff with subsequent services
coordinated by its sales personnel. The dollar increase also resulted from
increased participation in marketing events and publications.

Other costs were $88.6 million or 20% of net revenues in 1998 compared to $58.6
million or 19% of net revenues in 1997.  The dollar and percentage increase from
1997 resulted principally from decreased project personnel utilization and
increased facility, travel, and employee training costs.

Other income of $1.9 million in 1998 included interest income of $1.9 million
and a $433,000 gain from the Company's investment in Cambridge Technology
Capital Fund I, partially offset by foreign currency exchange rate loss and
other interest expense totaling $409,000.  Other income in 1997 of $1.4 million
consisted of interest income of $1.4 million and a $188,000 one-time gain from
sale of an investment, partially offset by foreign currency exchange rate loss
and other interest expense totaling $230,000.  The increase in interest income
in 1998 compared to 1997 is primarily due to increased cash and investment
balances.

The Company's effective income tax rate for the first nine months of 1998 was
38.4% compared to 39.3% for the same period a year ago.  The decrease in the
Company's effective tax rate is primarily due to favorable effects of state tax
rate minimization initiatives put in place in the second half of 1997 and
continuing into 1998 and favorable global tax planning strategies.  The
Company's effective tax rate may vary from period to period based on the
Company's future expansion into areas of varying country, state, and local
statutory income tax rates and its geographic mix of revenue and income.

Net income, excluding business combination costs of $8.4 million related to the
Excell acquisition, increased 48% to $41.4 million or $.66 per share (diluted)
for the 1998 period compared to $28.0 million or $.46 per share (diluted) for
the same period in 1997. Giving effect to the business combination costs, net
income for the nine months ended September 30, 1998 was $35.7 million, or $.57
per share (diluted).

LIQUIDITY AND CAPITAL RESOURCES

The Company continues to operate primarily debt-free and to enhance its working
capital position.  Working capital increased to $165.5 million at September 30,
1998, from $108.3 million at December 31, 1997.  This increase was primarily due
to increases in cash flow from operations, accounts receivable, proceeds from
the exercise of stock options, and proceeds from shares issued

                                       15
<PAGE>
 
under the Company's employee stock purchase plan, partially offset by cash used
for capital expenditures related to office expansions and computer equipment for
new employees and increases in accrued expenses and income taxes payable. The
Company's days sales in accounts receivable was 83 days during the third quarter
of 1998 compared to 71 days for the same period in 1997. The increase in days
sales in accounts receivable in 1998 is primarily due to lower net revenue
growth for the third quarter of 1998 coupled with an increase in average
accounts receivable.

Net cash provided by operating activities was $33.2 million in 1998 compared to
$27.2 million for the comparable period in 1997.  Increased accounts receivable,
unbilled revenue on contracts, and prepaid expenses and other current assets
were more than offset by increases in net income, tax benefits from the exercise
of stock options, depreciation and amortization, accrued expenses, deferred
revenue, and taxes payable.

Capital expenditures of $19.8 million in 1998 were used principally for computer
equipment to support the Company's expanding operations and employee
workstations and leasehold improvements related to the Company's expanding and
opening of new offices worldwide.  Capital expenditures for the full year of
1998 are expected to approximate $25.0 million, principally for leasehold
improvements, personal computers, employee workstations, telecommunication and
video conferencing equipment, and other equipment to support both current and
anticipated levels of customer activities worldwide.  In accordance with the
Company's strategic acquisition plans, the Company evaluates, on an ongoing
basis, potential acquisitions of companies or technologies that may complement
its business.

In order to support the Company's anticipated business growth, capital
expenditures, and working capital, the Company obtained, in September 1998,  a
$50.0 million unsecured senior revolving credit facility (the "Facility")
through a syndication arrangement committed equally by The Chase Manhattan Bank
("Chase") and Fleet National Bank.  The Facility expires on September 10, 2001
and replaces the Company's previously maintained $20.0 million revolving credit
facility that expired on June 30, 1998.  The Facility is administered by Chase
and carries a commitment fee, payable quarterly in arrears, calculated based on
the unused portion of the Facility and a price grid as set forth in the credit
agreement.  The Facility permits the Company to elect any of three possible
interest rate formulas as defined in the credit agreement.  Interest is payable
in arrears based on an interest period determined by the interest rate elected
by the Company.  The Facility requires, among other things, the Company to
maintain certain financial ratios, including debt service coverage, debt to
capital, and net worth.  At September 30, 1998, the Company was in compliance
with these financial ratio requirements.  As of September 30, 1998 and December
31, 1997, the Company had no balance outstanding under its revolving credit
facilities.

In the first quarter of 1998, the Company repaid the outstanding principal
balance of approximately $823,000 under a loan agreement entered into by Peter
Chadwick Holdings Limited to finance the purchase of a training facility located
in the United Kingdom. This loan agreement was then terminated. (see Note D of
the Notes to the Consolidated Financial Statements).

In January 1998, the Company entered into an agreement with Boston Properties
Limited Partnership ("Boston Properties") to lease a building to be constructed
and developed by Boston Properties.  This approximately 177,000 square foot
building, which is located in Cambridge, Massachusetts, will house the Company's
Northeast operations, new employee training facility,

                                       16
<PAGE>
 
and corporate departments. The lease agreement is for a ten-year period, which
is expected to commence in June 1999. Pursuant to the terms of the lease
agreement, the Company paid a $1.3 million refundable security deposit in
January 1998. The Company's current building is expected to be subleased through
its remaining lease term.

The Company expects that cash flows from operations will provide the principal
source of future liquidity for the Company.  However, the Company is currently
experiencing a period of growth, which could place a strain on the Company's
financial resources. The Company currently anticipates that existing cash and
investment balances combined with cash generated from operations and amounts
available under the Facility will be sufficient, at least through 1999, to meet
the Company's working capital requirements and to fund the expansion of the
Company's business.  In order to meet client demand for the Company's services,
the Company expects to continue to increase its professional staff and to open
additional sales and operations offices in North America and internationally.
Although the Company's plans to open offices and hire personnel are in response
to increased demand for the Company's services, a portion of these expenses will
be incurred in anticipation of increased demand.  Operating results and
liquidity may be adversely affected if market demand and revenues do not
increase as anticipated.  As the Company expands its international operations, a
number of factors, including market acceptance of the Company's services,
significant fluctuations in currency exchange rates, and changes in general
economic, political, and regulatory conditions, could also adversely affect
future results and liquidity.

STOCK OPTIONS

During October 1998, the Management Resource Committee of the Board of Directors
(the "Committee") reviewed the stock options held by the Company's employees and
concluded that the broad decline in the market price of the Company's Common
Stock and comparable companies in the IT service sector had resulted in a
significant number of outstanding stock options having exercise prices well
above the recent trading prices for the Common Stock.  The Committee also
considered the following: recent employee turnover; compensation packages
appearing less attractive due to option exercise prices well above the current
market price; and intensity in competition for experienced talent in the
IT marketplace. The Committee concluded that the disparity between the exercise
price of options previously granted and the then current market price of the
Company's Common Stock no longer provided the desired incentive to employees
that the stock options were issued to achieve.

In order to re-establish the incentive nature of the Company's stock option
program, on October 14, 1998 (the "Grant Date"), the Committee approved an offer
to exchange (the "Option Exchange") outstanding stock options issued on or after
April 24, 1997 (the "Affected Options") for newly issued options (the "Exchange
Options") with an exercise price of $15.50 per share, the fair market value of
the Common Stock on the Grant Date. The Company's Chief Executive Officer and
members of its Board of Directors are not eligible to participate in the Option
Exchange. As of the Grant Date, there were approximately 6.5 million Affected
Options. Participation in the Option Exchange is voluntary on the part of
eligible holders of Affected Options.

Eligible holders of Affected Options will receive one Exchange Option for each
Affected Option exchanged.  Each Exchange Option will have an exercise price of
$15.50 per share (the fair market value of the Company's Common Stock on

                                       17
<PAGE>
 
the Grant Date). The vesting schedule and other terms of the Exchange Options
will be substantially the same as those for the Affected Options, except as set
forth below.

As a condition of the opportunity to exchange Affected Options, the Exchange
Options will not be immediately exercisable even if the Affected Options
exchanged were exercisable on the Grant Date. As a general rule, employees will
not be able to exercise any Exchange Options until April 14, 1999. The Company's
senior vice presidents, vice presidents and associate vice presidents will not
be able to exercise any Exchange Options until October 14, 1999. Executive vice
presidents will be able to exercise the Exchange Options (to the extent vested)
after October 14, 1999, if the fair market value of the Company's Common Stock
exceeds the exercise price of the Exchange Options by at least 50% over any 
ten-day period after the Grant Date; otherwise, the Exchange Options will not be
exercisable before 2002.

THE YEAR 2000 ISSUE

The Year 2000 issue results from computer programs written using two digits
rather than four to define the applicable year.  Any of the Company's internal
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000.  This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.

The Company is conducting an assessment of its information technology ("IT")
systems and non-IT systems (such as building security, voice mail, telephone and
other systems containing embedded microprocessors) and is in the process of
determining the nature and extent of the work required, if any, to make any
material internal systems Year 2000 compliant.  This assessment is expected to
be completed by the end of 1998.  The Company's material internal IT systems
consist principally of accounting, human resources and sales force automation
application software created by third parties, plus internally developed time
and expense reporting and project accounting software applications.  For the
third-party software applications, the Company has obtained written confirmation
that the software applications are Year 2000 compliant. The Company also expects
that each of these third party applications will be upgraded, as well as tested
by the Company for Year 2000 compliance by the end of the first quarter of 1999.
The Company's internally developed applications are also expected to be Year
2000 compliant by the end of the first quarter of 1999.  The Company's computer
hardware platforms, principally servers, have been confirmed as Year 2000
compliant by the server manufacturers and the Company expects to have completed
testing by the end of 1998.

Based on currently available information, the Company believes the expense
associated with these efforts will be immaterial and has provided for the
enhancement of these systems in its operating and capital budgets for the
current fiscal year.  However, if compliance efforts of which the Company is not
currently aware are required and are not completed on time, or if the cost of
any required updating, modification or replacement of the Company's IT systems
exceeds the Company's estimates, the Year 2000 issue could have a material
adverse effect on the Company.

In addition to the Company's internal systems, the Company relies on third party
relationships in the conduct of its business.  For example, third party vendors
handle the payroll function for the Company, and the Company also relies on the
services of landlords of its facilities, telecommunication companies, banks,
utilities, and commercial airlines, among others.  The

                                       18
<PAGE>
 
Company is currently obtaining assurances from its landlords and material
vendors and suppliers that there will be no interruption of service as a result
of the Year 2000 issue, and to the extent such assurances are not given, the
Company intends to devise contingency plans to ameliorate the negative effects
on the Company in the event the Year 2000 issue results in the unavailability of
services. There can be no assurance that any contingency plans developed by the
Company will prevent any such service interruption on the part of one or more of
the Company's third party vendors or suppliers from having a material adverse
effect on the Company. In addition, the failure on the part of the accounting
systems of the Company's clients due to the Year 2000 issue could result in a
delay in the payment of invoices issued by the Company for services and
expenses. A failure of the accounting systems of a significant number of the
Company's clients would have a material adverse effect on the Company.

The Company is preparing written contingency plans to address failures in its
major IT and non-IT systems.  These plans will include identification of major
systems, dependencies on third parties, and resources and strategies necessary
to restore operations or work around failures.  The failure of the Company's
accounting systems resulting from a Year 2000 related power system outage at the
Company's central data center, particularly at the end of a fiscal period, could
represent a reasonably likely worst case scenario.  The Company's contingency
plan provides for back-up power systems that could support the data center, as
well as the operation of a parallel third party disaster recovery site.

Although the Company's principal service offerings do not include Year 2000
remediation services, former, present and future clients could assert that
certain services performed by the Company involved or are related to the Year
2000 issue. The Company has recommended, implemented and customized various
third-party software packages for its clients, certain of which may not be Year
2000 compliant.  Because the Company has designed, developed and implemented
software and systems for a large number of clients since 1991, there can be no
way of assuring that all such software programs and systems will be Year 2000
compliant.  In particular, the Company's solution delivery methodology, in many
cases, empowers clients to maintain, alter and upgrade systems after the
completion of an engagement.  Due to the potential significance of the Year 2000
issue upon client operations, upon any failure of critical client systems or
processes that may be directly or indirectly connected or related to systems or
software analyzed, designed, developed, or implemented by the Company, the
Company may be subjected to claims regardless of whether the failure is related
to the services provided by the Company.  If asserted, the resolution of such
claims (and the associated defense costs) could have a material adverse effect
on the Company.

The Company's policy has been to attempt to include provisions in client
contracts that, among other things, disclaim implied warranties, limit the
duration of express warranties, limit the Company's liability to the amount of
fees paid by the client to the Company in connection with the project, and
disclaim any liability arising from third-party software that is implemented,
customized or installed by the Company.   There can be no assurance that the
Company will be able to obtain these contractual protections in agreements
concerning future projects, or that any contractual provisions governing current
and completed projects, will prevent clients from asserting claims against the
Company with respect to the Year 2000 issue. There also can be no assurance that
the contractual protections, if any, obtained by the Company will operate to
protect the Company from, or limit the amount of, any liability arising from
claims asserted against the Company.

                                       19
<PAGE>
 
NEW ACCOUNTING PRONOUNCEMENTS

In March 1998, Statement of Position 98-1, "Accounting for the Cost of Computer
Software Developed or Obtained for Internal Use" ("SOP 98-1"), was issued (see
Note I of Notes to Consolidated Financial Statements).

In July 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"), which is effective for fiscal
years beginning after December 15, 1997.  Interim reporting disclosures are not
required in the first year of adoption (see Note I of Notes to Consolidated
Financial Statements).

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133 is effective for all fiscal
quarters of all fiscal years beginning after June 15, 1999 (January 1, 2000 for
the Company) (see Note I of Notes to Consolidated Financial Statements).

FORWARD-LOOKING STATEMENTS

This Form 10-Q includes forward-looking statements (statements that are not
historical facts) such as statements about future net revenues and profits;
capital expenditures; liquidity sources and needs; working capital needs; the
Year 2000 issue; the impact of the Company's new North American strategic
business unit; increases in personnel and related costs; and opening additional
offices.  These forward-looking statements are subject to several risks and
uncertainties and the Company's actual future results may differ significantly
from those stated in any forward-looking statements.  While it is impossible to
identify each factor and event that could affect the Company's results,
variations in the Company's revenues and operating results occur from time to
time as a result of a number of factors, such as the significance of client
engagements commenced and completed during the period; the number of working
days in a period; employee hiring, retention, and utilization rates; the
Company's ability to manage its growth; the Year 2000 issue, including the
effect of the Year 2000 issue on client purchasing patterns; competitive
factors; international operations; acceptance and profitability of the Company's
services in new territories; integration of companies acquired; and protection
of intellectual property.  The timing of revenues is difficult to forecast
because the Company's sales cycle is relatively long in the case of new clients
and may depend on factors such as the size and scope of the assignments and
general economic conditions.  Because a high percentage of the Company's
expenses are relatively fixed, a variation in the timing of the initiation or
the completion of client assignments, particularly at or near the end of any
quarter, can cause significant variations in operating results from period to
period.  The Company's Form 10-Q for the quarter ended June 30, 1998 included
forward looking statements concerning the following items as a percentage of net
revenues for the remainder of 1998: project personnel costs; general and
administration expenses; sales and marketing expenses; and other costs.  Due to
the recent acquisition of Excell, the downward pressure on North American RAD
revenues, the formation of the North American strategic business unit, and the
continued expansion of the Company's business, the percentage of net revenues
statements identified in the June 30, 1998 Form 10-Q are no longer meaningful
for the remainder of 1998 and should not be relied upon.

                                       20
<PAGE>
 
PART II - OTHER INFORMATION

ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS
-------   -----------------------------------------

     In September 1998, the Company amended the Rights Agreement, dated as of
     June 23, 1997, by and between the Company and ChaseMellon Shareholder
     Services, LLC (the "Rights Agreement"), to delete the "Continuing Director"
     provisions of the Rights Agreement.  See Exhibits 4.1 and 4.2 to this
     Quarterly Report on Form 10-Q.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K
-------   --------------------------------
 
(a)  Exhibits:
 3.1(1)   Amended and Restated Certificate of Incorporation of the Company, 
          as amended.
 3.2(2)   Amended and Restated By-laws of the Company.
 4.1(3)   Rights Agreement dated June 23, 1997 by and between the Company and
          ChaseMellon Shareholder Services, LLC (the "Rights Agreement").
 4.2(4)   Amendment No. 1 to the Rights Agreement dated September 30, 1998
          by and between the Company and ChaseMellon Shareholder Services, LLC.
10.1      Credit Agreement dated as of September 10, 1998 by and among the 
          Company, certain of its subsidiaries, The Chase Manhattan Bank and
          Fleet National Bank.
10.2      Guaranty dated September 10, 1998 by certain subsidiaries of the
          Company in favor of The Chase Manhattan Bank and Fleet National Bank.
11.1      Statement Regarding Computation of Per Share Earnings.
27        Financial Data Schedule.
------------------------------------------------- 
 
          (1)  Incorporated herein by reference to Exhibit 3.1 to the 
               Company's Report on Form 10-Q for the period ended June 30, 1998.
          (2)  Incorporated herein by reference to Exhibit 3.2 to the 
               Company's Registration Statement on Form S-1 (File No. 33-56338).
          (3)  Incorporated herein by reference to Exhibit 4.1 to the 
               Company's Registration Statement on Form 8A/A filed on 
               September 30, 1998.
          (4)  Incorporated herein by reference to Exhibit 4.2 to the 
               Company's Registration Statement on Form 8-A/A filed on 
               September 30, 1998.

(b)  Reports on Form 8-K:

     A report on Form 8-K was filed by the Company on September 11, 1998 to
     disclose the acquisition by the Company of Excell Data Corporation
     ("Excell") pursuant to an Agreement and Plan of Merger, dated as of August
     31, 1998 by and among the Company, Cambridge/Washington Acquisition Corp.,
     a Washington corporation and wholly-owned subsidiary of the Company,
     Excell, and the shareholders of Excell.

                                       21
<PAGE>
 
                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



              CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.



        Date:  November 2, 1998     By: /s/ Arthur M. Toscanini
                                        ------------------------  
                                       Arthur M. Toscanini
                                       Executive Vice President and
                                          Chief Financial Officer

                                       22
<PAGE>
 
                                 EXHIBIT INDEX


 
Exhibit No.     Description
-----------     -----------
 
 3.1(1)         Amended and Restated Certificate of Incorporation of the 
                Company, as amended.
 3.2(2)         Amended and Restated By-laws of the Company.
 4.1(3)         Rights Agreement dated June 23, 1997 by and between the
                Company and ChaseMellon Shareholder Services, LLC 
                (the "Rights Agreement").
 4.2(4)         Amendment No. 1 to the Rights Agreement dated September 30, 
                1998 by and between the Company and ChaseMellon 
                Shareholder Services, LLC.
10.1            Credit Agreement dated as of September 10, 1998 by and among 
                the Company, certain of its subsidiaries, The Chase
                Manhattan Bank and Fleet National Bank.
10.2            Guaranty dated September 10, 1998 by certain subsidiaries of 
                the Company in favor of The Chase Manhattan Bank and Fleet
                National Bank.
11.1            Statement Regarding Computation of Per Share Earnings.
27              Financial Data Schedule.
-------------------------------------------------  
 
                (1)  Incorporated herein by reference to Exhibit 3.1 to the
                     Company's Report on Form 10-Q for the period ended 
                     June 30, 1998.
                (2)  Incorporated herein by reference to Exhibit 3.2 to the 
                     Company's Registration Statement on Form S-1 
                     (File No. 33-56338).
                (3)  Incorporated herein by reference to Exhibit 4.1 to the 
                     Company's Registration Statement on Form 8A/A filed on
                     September 30, 1998.
                (4)  Incorporated herein by reference to Exhibit 4.2 to the
                     Company's Registration Statement on Form 8-A/A filed on 
                     September 30, 1998.