<PAGE>


                          SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, D.C.  20549

                                      FORM 10-Q
(Mark One)
     X             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                        OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended November 30, 1997 

                                         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
                                       0-22703


                             GREAT PLAINS SOFTWARE, INC.
                (Exact name of registrant as specified in its charter)


                    MINNESOTA                            45-0374871
        (State or other jurisdiction of     (I.R.S. Employer Identification No.)
         incorporation or organization)



  1701 S.W. 38TH STREET, FARGO, NORTH DAKOTA                58103
   (Address of principal executive offices)               (Zip Code)


                                    (701) 281-0550
                 (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          
          ------        --------

     As of January 9, 1998, the number of shares outstanding of the registrant's
Common Stock, par value $.01 per share, was 13,675,418.

<PAGE>

                            PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                             GREAT PLAINS SOFTWARE, INC.

                         CONSOLIDATED CONDENSED BALANCE SHEET
                                    (IN THOUSANDS)

                                                        November 30,    May 31,
                                                           1997          1997
                                                           ----          ----
                                                        (unaudited)

Assets:
  Current assets:
     Cash and cash equivalents                            $12,776      $12,101
     Investments                                           54,428        4,142
     Accounts receivable, net                               6,678        5,452
     Deferred income taxes                                  3,018        3,279
     Other current assets                                   2,286        1,731
                                                          -------      -------
       Total current assets                                79,186       26,705

  Property and equipment, net                               7,175        5,821
  Goodwill, net                                               380          438
  Other assets                                              2,203          250
                                                          -------      -------
       Total assets                                       $88,944      $33,214
                                                          -------      -------

Liabilities and stockholders' equity (deficit)
  Current liabilities:
     Accounts payable                                     $ 2,102      $ 1,788
     Accrued expenses                                       7,173        7,811
     Deferred revenue                                      12,035       10,448
                                                          -------      -------
       Total current liabilities                           21,310       20,047

  Long-term liabilities:
     Deferred tax liability                                   746          746
                                                          -------      -------
       Total liabilities                                   22,056       20,793

  Mandatorily redeemable convertible 
     preferred stock                                                    28,698

  Stockholders' equity (deficit):
     Convertible preferred stock                                           199
     Common stock                                             135           81
     Additional paid-in capital                            65,795      (13,843)
     Retained earnings (deficit)                              958       (2,714)
                                                          -------      -------
       Total stockholders' equity (deficit)                66,888      (16,277)

  Total liabilities and stockholders' equity (deficit)    $88,944      $33,214
                                                          -------      -------

      See accompanying notes to the consolidated condensed financial statements.

<PAGE>

                             GREAT PLAINS SOFTWARE, INC.

                      CONSOLIDATED CONDENSED STATEMENT OF INCOME
                       (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



<TABLE>
<CAPTION>

                                                                  Three Months Ended           Six Months Ended
                                                                      November 30,                November 30,
                                                                 1997           1996           1997          1996
                                                                 ----           ----           ----          ----
                                                                     (unaudited)                  (unaudited)
<S>                                                            <C>            <C>            <C>            <C>    
Revenues:
  License                                                      $12,282        $ 8,478        $22,617        $15,133
  Service                                                        7,763          5,208         14,202          9,621
                                                               -------        -------        -------        -------
     Total revenues                                             20,045         13,686         36,819         24,754

Cost of revenues:
  License                                                        2,654          1,550          4,589          2,720
  Service                                                        2,511          2,012          4,762          3,648
                                                               -------        -------        -------        -------
     Total cost of revenues                                      5,165          3,562          9,351          6,368
                                                               -------        -------        -------        -------

     Gross profit                                               14,880         10,124         27,468         18,386

Operating expenses:
  Sales and marketing                                            7,709          5,660         13,908          9,714
  Research and development                                       3,011          2,318          5,687          4,490
  General and administrative                                     1,662          1,209          3,556          2,433
                                                               -------        -------        -------        -------
     Total operating expenses                                   12,382          9,187         23,151         16,637
                                                               -------        -------        -------        -------

Operating income                                                 2,498            937          4,317          1,749
Other income, net                                                1,067            119          1,803            202
                                                               -------        -------        -------        -------
Income before income taxes                                       3,565          1,056          6,120          1,951
Income tax provision                                             1,426            406          2,448            750
                                                               -------        -------        -------        -------
     Net income                                                $ 2,139        $   650        $ 3,672        $ 1,201
                                                               -------        -------        -------        -------

Net income per share                                           $  0.15                       $  0.27

Shares used in computing net income per share               14,169,837                    13,820,984

Pro forma net income per share                                                $  0.07                       $  0.12

Shares used in computing pro forma net
  income per share                                                          9,845,878                     9,846,419
</TABLE>


      See accompanying notes to the consolidated condensed financial statements.

<PAGE>

                             GREAT PLAINS SOFTWARE, INC.

                    CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
                                    (IN THOUSANDS)



                                                   Six Months Ended November 30,
                                                           1997          1996
                                                           ----          ----
                                                        (unaudited)  (unaudited)
Operating activities:
  Funds generated by current operations:
     Net income                                           $ 3,672      $ 1,201

  Adjustments to reconcile net income to net cash provided
  by operating activities:
     Depreciation and amortization                          1,295          921
     Deferred taxes                                           511          743

     Changes in operating assets and liabilities:
       Accounts receivable                                 (1,226)         906
       Accounts payable                                       314          218
       Accrued expenses                                      (638)        (480)
       Deferred revenue                                     1,587       (1,243)
       Other current assets                                  (555)        (150)
                                                          -------      -------
        Net cash provided by operating activities           4,960        2,116

Investing activities:
  Purchase of property, plant and equipment, net           (2,591)      (1,347)
  Purchase of other assets                                 (1,953)           -
  Purchase of investments                                 (50,286)           -
                                                          -------      -------
       Net cash used by investing activities              (54,830)      (1,347)

Financing activities:
  Principal payments on long-term debt and capital
     leases obligations                                         -         (347)
  Sale (repurchase) of stock                               50,243          (37)
  Exercise of stock options                                   230            7
  Stock issued for business acquisitions                       72            -
                                                          -------      -------
  Net cash provided (used) by financing activities         50,545         (377)
                                                          -------      -------

Net increase in cash                                          675          392

Cash at beginning of period                                12,101        8,256
                                                          -------      -------

Cash at end of period                                     $12,776       $8,648
                                                          -------      -------

      See accompanying notes to the consolidated condensed financial statements.

<PAGE>

                             GREAT PLAINS SOFTWARE, INC.

                 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                     (UNAUDITED)


1.   Basis of Presentation

     The information at November 30, 1997 and 1996 and for the three and six
month periods then ended is unaudited, but includes all adjustments (consisting
only of normal recurring adjustments) which the Company's management believes to
be necessary for the fair presentation of the financial position, results of
operations and changes in cash flows for the periods presented.  The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period.  Despite management's best effort to establish good faith estimates and
assumptions, actual results may differ.

     The accompanying interim financial statements should be read in conjunction
with the financial statements and related notes included in the Company's Annual
Report on Form 10-K for the year ended May 31, 1997. Certain information and
footnote disclosures normally included in annual financial statements prepared
in accordance with generally accepted accounting principles have been condensed
or omitted as permitted by rules and regulations of the Securities and Exchange
Commission.  Interim results of operations for the three and six month periods
ended November 30, 1997 are not necessarily indicative of operating results for
the full fiscal year.

2.   Earnings per Share

     For the three months and six months ended November 30, 1997, net income per
share is computed on the basis of weighted average number of shares outstanding
plus common stock equivalents, consisting of outstanding dilutive stock options
(using the treasury stock method).

     Pro forma net income per share for the three months and six months ended
November 30, 1996 is based on the pro forma weighted average number of common
stock and common equivalent shares outstanding for the period.  It assumes the
conversion of the Company's Series A Convertible Preferred Stock and the Series
B Mandatorily Redeemable Convertible Preferred Stock into 1,847,627 shares of
common stock effective June 1, 1996.

     In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 (SFAS 128 Earnings per Share). SFAS
128 establishes new standards for computing and presenting earnings per share
and will be effective for the Company's interim and annual periods ending after
December 15, 1997.  Early adoption of SFAS 128 is not permitted.  SFAS 128
requires restatement of all previously reported earnings per share data that are
presented.  SFAS 128 replaces primary and fully diluted earnings per share with
basic and diluted earnings per share.  The Company has calculated the basic
earnings per share and the diluted earnings per share to be $0.16 and $0.15,
respectively, for the three months ended November 30, 1997 and calculated the
basic earnings per share and the diluted earnings per share to be  $0.28 and
$0.27, respectively, for the six months ended November 30, 1997.

<PAGE>

3.   Initial Public Offering

     In June 1997, the Company sold 3,450,000 shares of common stock at a price
of $16.00 per share in an initial public offering.  The initial public offering
generated more than $50 million of proceeds to the Company.  As a result of the
initial public offering, the Series A Preferred Stock and the Series B Preferred
Stock were converted to common stock.  In connection with the initial public
offering, certain other resolutions of the Company's Board of Directors became
effective, including authorization of a four-for-three stock split of the issued
and outstanding shares of the Company's common stock, in the form of a stock
dividend, which was issued immediately prior to the initial public offering. 
All references to common stock amounts, shares and per share data have been
adjusted to give retroactive effect to the stock split.

4.   Acquisitions

     During the quarter ending November 30, 1997,  the Company acquired all of
the outstanding capital stock of its Singapore distributor in a transaction that
was accounted for as a pooling of interests.  In exchange for capital stock, the
Company issued 56,250 shares of the Company's common stock. Financial data for
the periods prior to the closing of this transaction has not been restated
because neither the net assets nor operating results would have been material to
the Company's consolidated financial statements.

<PAGE>

                             GREAT PLAINS SOFTWARE, INC.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

     The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto.

RESULTS OF OPERATIONS

     The following table sets forth for the periods indicated the percentage of
total revenues represented by certain items reflected in the Company's
consolidated condensed statement of income.


<TABLE>
<CAPTION>

                                          Three Months Ended            Six Months Ended
                                             November 30,                 November 30,
                                         1997           1996           1997          1996
                                         ----           ----           ----          ----
<S>                                     <C>            <C>            <C>           <C>
As a percentage of total revenues
  Revenues:
     License                             61.3%          61.9%          61.4%          61.1%
     Service                             38.7           38.1           38.6           38.9
                                        -----          -----          -----          -----
       Total revenue                    100.0          100.0          100.0          100.0

  Cost of revenues:
     License                             13.2           11.3           12.5           11.0
     Service                             12.5           14.7           12.9           14.7
                                        -----          -----          -----          -----
       Total cost of revenues            25.7           26.0           25.4           25.7
                                        -----          -----          -----          -----

       Gross margin                      74.3           74.0           74.6           74.3

  Operating expenses:
     Sales and marketing                 38.4           41.4           37.8           39.2
     Research and development            15.0           16.9           15.4           18.1
     General and administrative           8.3            8.8            9.7            9.9
                                        -----          -----          -----          -----
       Total operating expenses          61.7           67.1           62.9           67.2
                                        -----          -----          -----          -----

  Operating income                       12.6            6.9           11.7            7.1
  Other income, net                       5.3             .8            4.9             .8
                                        -----          -----          -----          -----
  Income before income taxes             17.9            7.7           16.6            7.9
  Income tax provision                    7.1            3.0            6.6            3.0
                                        -----          -----          -----          -----
       Net income                        10.8%           4.7%          10.0%           4.9%
                                        -----          -----          -----          -----
</TABLE>

<PAGE>

REVENUES

     REVENUES.   Revenues for the quarter ended November 30, 1997 were $20.0
million, representing an increase of 46.5% over revenues of $13.7 million for
the quarter ended November 30, 1996. This increase in revenues was primarily due
to increased demand for the Company's Dynamics C/S+ and Dynamics products
(together, the "client/server products") and related service fees. During the
quarter ended November 30, 1997, revenues from the Company's heritage products
decreased as compared to the quarter ended November 30, 1996. Revenues for the
six months ended November 30, 1997 were $36.8 million, representing an increase
of 48.7% over revenues of $24.8 million for the six months ended November 30,
1996. This increase in revenues was primarily a result of increased demand for
the Company's client/server products. Revenues from the Company's heritage
products were $4.8 million for the six months ended November 30, 1997, compared
to $5.0 million for the six months ended November 30, 1996.  Heritage revenue
was down only slightly in the most recent six month period due to continued
strong demand from customers for an upgrade to the Company's heritage product,
an upgrade which was released in February, 1997.

     The following tables set forth for the periods indicated client/server and
heritage product revenues, each as a percentage of total revenues: 

                                             Three Months Ended November 30,
                                               1997                1996
                                               ----                ----
Client/server product revenues                 89.5%               81.7%
Heritage product revenues                      10.5%               18.3%


                                             Six Months Ended November 30,
                                               1997                1996
                                               ----                ----
Client/server product revenues                 86.9%               79.7%
Heritage product revenues                      13.1%               20.3%


     Client/server product revenues, including license and service fees, were
$17.9 million for the quarter ended November 30, 1997, representing an increase
of 60.5% over client/server product revenues of $11.2 million for the quarter
ended November 30, 1996. During the quarter ended November 30, 1996, the Company
shipped new distribution modules for the Microsoft SQL Server edition of its
Dynamics C/S+ product. As a result, the Company experienced significant
client/server revenue in the quarter ended November 30, 1996. In the quarter
ended November 30, 1997, the Company shipped new releases of its client/server
product; however, the Company had no direct revenue associated with these
releases as all customers on a maintenance plan with the Company received the
new release for no additional fee. For the six months ended November 30, 1997,
client/server product revenues were $32.0 million, an increase of 62.2% over the
$19.8 million in client/server product revenues for the six months ended
November 30, 1996. This increase in revenues was primarily the result of
increases in new customer licenses as well as increased revenues from
maintenance and telephone support contracts due to an increased base of
client/server customers.  

     Heritage product revenues, including license and service fees, were $2.1
million for the quarter ended November 30, 1997, representing a decrease of
16.2% from revenues of $2.5 million for the quarter ended November 30, 1996. 
This decrease in heritage product revenues was primarily due to a decrease in
new customer licenses as a result of the general market trend towards Windows
and client/server products, including the client/server product offerings from
the Company. In addition, the decrease in heritage revenue can be, in part,
attributed to a loss in heritage revenue from existing customers as they migrate
to the Company's client/server products, a revenue loss which is, in part,
offset by the increase in client/server revenues from heritage customers
migrating to the Company's client/server products.  For the six months ended
November 30, 1997, heritage product revenues were $4.8 million compared with
heritage product revenues of $5.0 million for the six months ended 

<PAGE>

November 30, 1996. Heritage product revenues declined only 4.1% for the six
months ended November 30, 1997 due to continued strong demand for the latest
upgrade to the Company's heritage product. The Company anticipates that heritage
product revenues may decrease more significantly in the future than in the six
months ended November 30, 1997.  

     The Company's international revenues increased to $3.2 million for the
quarter ended November 30, 1997, representing 15.7% of total revenues and
compared to $2.4 million for the quarter ended November 30, 1996.  This increase
was primarily a result of growth in existing markets, including growth in the
Company's subsidiary operations in the United Kingdom and Australia, as well as
revenues from a new subsidiary in Singapore. International revenues for the six
months ended November 30, 1997 were $5.4 million, representing an increase of
48.9% over international revenues of $3.6 million for the six months ended
November 30, 1996. This increase is primarily a result of growth in existing
international markets including its international subsidiaries. In December
1997, the Company opened an international subsidiary in South Africa to serve
Partners and customers throughout Africa. 

     LICENSE.  Total license fee revenues for the quarter ended November 30,
1997 were $12.3 million, representing an increase of 44.9% over license revenues
of $8.5 million for the quarter ended November 30, 1996.  This increase in total
license fees was largely attributable to increased market acceptance and demand
for the Company's Windows NT client/server product offerings, Dynamics and
Dynamics C/S+. During the quarter ended November 30, 1996, the Company released
new distribution modules on the Microsoft SQL Server edition of its Dynamics
C/S+ product line and, as a result, experienced significant increases in license
fee revenues in that quarter. For the six months ended November 30, 1997,
license fee revenues were $22.6 million, representing an increase of 49.5% over
the $15.1 million in license revenues for the six months ended November 30,
1996. This increase was primarily a result of an increased number of new
client/server customer licenses as well as continued strong demand for the
latest upgrade to the Company's heritage product.

     SERVICE.   Service revenues for the quarter ended November 30, 1997 were
$7.7 million, representing an increase of 49.0% over service revenues of $5.2
million for the quarter ended November 30, 1996. Service revenues for the six
months ended November 30, 1997 were $14.2 million, representing an increase of
47.6% over service revenues of $9.6 million for the six months ended November
30, 1996. These increases in service revenues were largely a result of the
service revenues associated with new client/server licenses as well as renewals
of existing maintenance and support contracts from the increasing base of
client/server customers. Service revenues as a percentage of total revenues were
38.7% for the three months ended November 30, 1997 compared with 38.1% of total
revenues for the three months ended November 30, 1996. For the six months ended
November 30, 1997 and 1996, service revenues as a percentage of total revenues
were 38.6% and 38.9%, respectively. 

COSTS AND EXPENSES

     COST OF LICENSE FEES.   Cost of license fees consists primarily of the
costs of product manuals, media, shipping and royalties paid to third-party
vendors. Cost of license fees for the quarter ended November 30, 1997 increased
to $2.7 million from $1.6 million in the quarter ended November 30, 1996,
representing 21.6% and 18.3% of total license fee revenues, respectively.  The
dollar increase in cost of license fees in the quarter ended November 30, 1997
is primarily attributable to the overall growth in license fee revenues, an
increase in royalties paid to third-party vendors and the shipment of new
releases of Dynamics C/S+ and Dynamics to all customers on a maintenance
contract.  The increase in cost of license fees as a percentage of total license
fee revenues is primarily due to royalties paid to third-party vendors and the
shipment of the new client/server product releases to all customers on a
maintenance plan for no additional fee to the customer. Cost of license fees for
the six months ended November 30, 1997 increased to $4.6 million from $2.7
million, representing 20.3% and 18.0% of total license fee revenues,
respectively. The cost of license fees as a percentage of license fee revenues
may increase if the Company continues to add third-party vendors. In addition,
the cost of license fees as a percentage of license fee revenues may increase
during quarters with new product releases. 

<PAGE>

     COST OF SERVICES.   Cost of services consists of the costs of providing
telephone support, training and consulting services to the Company's customers
and distribution channel.  Cost of services for the quarter ended November 30,
1997 increased to $2.5 million from $2.0 million for the quarter ended November
30, 1996, representing 32.3% and 38.6% of total service revenues, respectively.
Cost of services for the six months ended November 30, 1997 increased to $4.8
million from $3.7 million for the six months ended November 30, 1996,
representing 33.5% and 37.9% of total service revenues, respectively. These
increases in cost of services was primarily due to the expansion of the
Company's service resources.  Cost of services as a percentage of service
revenues decreased for the quarter and six months ended November 30, 1997
compared to the same periods last fiscal year. This decrease was primarily a
result of improved efficiency and continued strong customer enrollment in
maintenance plans and support contracts.  The Company anticipates that cost of
services will increase in dollar amount as service revenues increase and may
decrease slightly as a percentage of service revenues.

     SALES AND MARKETING.   Sales and Marketing expenses consist primarily of
salaries, commissions, travel and promotional expenses.  Sales and marketing
expenses increased to $7.7 million for the quarter ended November 30, 1997
compared with $5.7 million for the quarter ended November 30, 1996, representing
38.4% and 41.4% of total revenues, respectively.  Sales and marketing expenses
for the six months ended November 30, 1997 increased to $13.9 million from $9.7
million for the six months ended November 30, 1996, representing 37.8% and 39.2%
of total revenues, respectively. The increase in sales and marketing expenses
for both the quarter and six months ended November 30, 1997 is attributable to
the hiring of additional sales personnel, increased commission expenses
associated with higher revenue, continued investments in expanding the capacity
and capability of the channel for its Windows NT client/server products, and
increased marketing expenses for the Company's client/server product line for
Microsoft SQL Server.  In addition, the Company increased sales and marketing
expenses related to the operation of its international subsidiaries in the
United Kingdom, Australia and Singapore. The decrease in sales and marketing as
a percent of total revenues for the quarter and six months ended November 30,
1997 compared to the same periods in the last fiscal year was primarily a result
of increased productivity in the Company's Partner channel. The Company 
anticipates that sales and marketing expenses will increase in dollar amount as 
total revenues increase. However, the Company does not anticipate significant 
changes in sales and marketing expenses as a percent of total revenues. 

     RESEARCH AND DEVELOPMENT.  Research and development expenses consist
primarily of compensation of development personnel and depreciation of
equipment. Total research and development expenses were $3.0 million for the
quarter ended November 30, 1997 compared with $2.3 million for the quarter ended
November 30, 1996, representing 15.0% and 16.9% of total revenues, respectively.
For the six months ended November 30, 1997, total research and development
expenses were $5.7 million, compared with $4.5 million for the six months ended
November 30, 1996, representing 15.4% and 18.1% of total revenues, respectively.
Research and development expenditure increases were primarily attributable to
increases in the Company's salary cost for software engineers and the
infrastructure costs required to support product development initiatives in the
following areas: (i) expansion and enhancement of the Company's client/server
product offerings, (ii) research and development of Internet-based products
which enhance the functionality of the Company's financial management solutions,
and (iii) additional research and development to optimize the Company's
client/server products for the latest technologies. Research and development
expenses have decreased as a percent of total revenues in the most recent six
month period due to efficiencies gained through greater experience levels among
development personnel, even greater automation in the Company's development
testing processes, and additional efficiencies gained through an increased
research and development focus on Microsoft technologies.  The Company
anticipates that it will continue to devote substantial resources to its
research and development effort and that research and development expenses will
increase in dollar amount in future periods but not necessarily as a percentage
of  revenues. 

<PAGE>

     GENERAL AND ADMINISTRATIVE.   General and administrative expenses consist
primarily of salaries of executive, financial, human resources and information
services personnel as well as outside professional fees.  General and
administrative expenses for the quarter ended November 30, 1997 were $1.7
million, compared with $1.2 million for the quarter ended November 30, 1996,
representing 8.3% and 8.8% of total revenues, respectively. For the six months
ended November 30, 1997, general and administrative expenses were $3.6 million,
compared with $2.4 million for the six months ended November 30, 1996,
representing 9.7% and 9.9% of total revenues, respectively. These increases in
dollar amounts were primarily due to increased professional fees related to the
requirements of being a publicly held company.  The Company believes that its
general and administrative expenses will increase in dollar amount in the future
to support the expansion of its operations and as a result of expenses
associated with being a public company.

     OTHER INCOME, NET.  Other income, net consists primarily of earnings from
investments and gains or losses from disposal of fixed assets, net of any
interest expense.  Other income, net increased to $1.1 million for the quarter
ended November 30, 1997, compared with $0.1 million for the quarter ended
November 30, 1996.  Included in other income, net for the three months ended
November 30, 1997 is the gain from the sale of the Company's small business
Windows accounting product, Profit. For the six months ended November 30, 1997,
other income, net increased to $1.8 million from $0.2 million for the six months
ended November 30, 1996. The increase in dollar amount for the quarter and six
months ended November 30, 1997 was primarily from increased investment earnings
due to increased investment levels as a result of the more than $50 million
received from the Company's initial public offering of common stock as well as
additional cash resulting from the Company's improved profitability. 

     PROVISION FOR INCOME TAXES.   The Company's income tax provision for the
quarter ended November 30, 1997 was $1.4 million, compared with $0.4 million for
the quarter ended November 30, 1996. The Company's income tax provision for the
six months ended November 30, 1997 was $2.5 million, compared with $0.8 million
for the six months ended November 30, 1996.    The provision for income taxes
was 40% of income before income taxes for the quarter and six months ended
November 30, 1997, which represents a 2% increase from the fiscal 1997 annual
effective income tax rate of 38% as a result of full state statutory tax rates. 
In addition, this increase in the provision for income taxes is primarily
attributable to the increased operating income and interest income for the
Company for the quarter and six months ended November 30, 1997, compared with
the quarter and six months ended November 30, 1996.

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

     The Company has historically funded operations primarily through cash
provided by operations and the sale of equity securities and, to a lesser
extent, from borrowings.  Currently, the Company meets its working capital needs
and capital equipment needs with cash provided by operations.

     Cash provided by operating activities for the six months ended November 30,
1997 was $5.0 million, compared with $2.1 million for the six months ended
November 30, 1996.  The increase in cash provided by operations for the six
months ended November 30, 1997, was primarily due to increased profitability of
the Company's operations, an increase in deferred revenues and an increase in
accrued expenses offset, in part, by an increase in accounts receivable.

     The Company's investing activities used cash of $54.8 million for the six
months ended November 30, 1997, compared with $1.3 million for the three months
ended November 30, 1996.  The principal use of cash in investing activities for
the six months ended November 30, 1997 was approximately $50 million for the
purchase of investments following the Company's initial public offering of
common stock.  In addition, investing activities for the six months ended
November 30, 1997 included increased capital expenditures related to the
acquisition of computer equipment and furniture required to support expansion of
the Company's operations. Investing activities also included investment in
minority interest positions in certain international operations.

     The Company's financing activities provided cash of $50.5 million during
the six months ended November 30, 1997, compared with cash used of $0.4 million
for the six months ended November 30, 1996.  The cash provided by financing
activities during the six months ended November 30, 1997, included $50.2 million
from the sale of the Company's common stock.

     The Company's sources of liquidity at November 30, 1997 consisted
principally of cash, cash equivalents and investments of $67.2 million.  This
amount includes approximately $50 million in cash generated from the Company's
initial public offering of common stock which was completed on June 25, 1997. 
The Company also has a $5.0 million revolving line of credit facility with a
bank.  The line of credit expires in December, 1997, and borrowings made
thereunder are subject to certain covenants.  No amounts were outstanding under
the line of credit at November 30, 1997.  The Company believes that its existing
cash, cash equivalents and investments, cash generated from operations and the
amounts available under the line of credit will be sufficient to fund its
operations for the foreseeable future.

CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION

     The foregoing Management's Discussion and Analysis of Financial Condition
and Results of Operations contains certain 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 represent the Company's expectations or beliefs, including, but not
limited to, statements concerning the Company's operations and financial
performance and condition.  For this purpose, any statements contained in this
Form 10-Q that are not statements of historical fact may be deemed to be
forward-looking statements.  The Company cautions that these statements by their
nature involve risks and uncertainties, certain of which are beyond the
Company's control, and actual results may differ materially depending on a
variety of important factors, including those described in Exhibit 99.1 to the
Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1997.


ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Not applicable.

<PAGE>

                              PART II. OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

     None.


ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS

     On September 5 1997, the Company issued 56,250 shares of its common stock
(the "Shares") in a transaction that was not registered under the Securities Act
of 1933, as amended (the "Securities Act"). The Shares were issued to the sole
shareholder of Great Plains Software (Singapore) Pte LTD ("GPS Singapore")
pursuant to an agreement  providing for the acquisition of all of the
outstanding shares of capital stock of GP Singapore (the "GPS Singapore Shares")
by the Company.  No underwriter of placement agent was involved in the issuance
of the Shares, and the Company received the GPS Singapore Shares as
consideration for the Shares.  The Shares were issued in a transaction exempt
pursuant to Section 4(2) of the Securities Act.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

     None.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     The 1997 Annual Meeting of Shareholders of Great Plains Software, Inc. (the
"Company") was held on September 10, 1997 (the "Annual Meeting").  Holders of
the Company's common stock of record on August 11, 1997 were entitled to one
vote per share.

     At the Annual Meeting, Raymond F. Good, J.A. Heidi Roizen and Joseph S.
Tibbetts, Jr. were elected directors for a term of three years.  The number of
votes cast for the election of each director and the number of votes withheld
were as follows:

                                                  FOR            WITHHELD
                                                  ---            --------
Raymond F. Good                                   9,959,589      34,246
J.A. Heidi Roizen                                 9,962,155      31,680
Joseph S. Tibbetts, Jr.                           9,962,155      31,680

The other directors whose terms of office as directors continued after the
Annual Meeting are Douglas J. Burgum, Bradley J. Burgum, Frederick W. Burgum,
William V. Campbell and Sanjeev K. Mehra.

     With respect to the proposal to approve the appointment of Price Waterhouse
LLP as the Company's independent auditors for the fiscal year ending May 31,
1998, there were 9,987,234 votes cast for the proposal, 4,430 votes cast against
the proposal and 2,175 abstentions.  There were no broker nonvotes with respect
to such matter.

ITEM 5.   OTHER INFORMATION

     None.

<PAGE>

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits
     
     11.1  Statement of Computation of Net Income Per Share

     27.1  Financial Data Schedule


(b)  Reports on Form 8K

No reports on Form 8K were filed during the quarter ended November 30, 1997.

<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.

Date:  January 14, 1998

                              GREAT PLAINS SOFTWARE, INC.



                              By     /s/ Douglas J. Burgum
                                --------------------------------------
                              Douglas J. Burgum
                              Chairman of the Board, President and 
                                 Chief Executive Officer



                              By   /s/ Terri F. Zimmerman
                                --------------------------------------
                              Terri F. Zimmerman  
                              Chief Financial Officer and Group Vice President, 
                                 Finance and Operations
                                 (principal financial and accounting officer)

<PAGE>

                                    EXHIBIT INDEX


     
11.1      Statement of Computation of Net Income Per Share
27.1      Financial Data Schedule