UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K
              Annual report pursuant to Section 13 or 15(d) of the
                        Securities Exchange Act of 1934

For the fiscal year ended December 31, 1997       Commission file number 0-26542

                            THE VANTIVE CORPORATION
             (Exact name of registrant as specified in its charter)


                Delaware                                       77-0266662
    (State or other jurisdiction of                         (I.R.S. Employer
     incorporation or organization)                        Identification No.)

         2455 Augustine Drive
        Santa Clara, California                                   95054
(Address of principal executive offices)                       (Zip code)


      Registrant's telephone number, including area code:  (408) 982-5700

       Securities registered pursuant to Section 12(b) of the Act:  None

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

                         Common Stock, $0.001 Par Value
                                (Title of class)

         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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K  (Section  229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K.  [   ]

         The aggregate market value of the voting stock held by non-affiliates
of the registrant, based upon the closing price of the Common Stock on February
27, 1998, as reported on NASDAQ National Market was approximately $640,398,951.
Shares of Common Stock held by each executive officer and director and by each
person who owns 5% or more of the outstanding Common Stock have been excluded
in that such persons may be deemed to be affiliates.  This determination of
affiliates status is not necessarily a conclusive determination for other
purposes.

         The number of shares of the registrant's $0.001 par value Common Stock
outstanding on February 27, 1998, was 25,433,732.

         Part III incorporates by reference from the definitive proxy statement
for the registrant's 1998 annual meeting of stockholders to be filed with the
Commission pursuant to Regulation 14A not later than 120 days after the end of
the fiscal year covered by this Form.
<PAGE>



PART I

This report includes a number of forward-looking  statements which reflect the
Company's current views  with respect to future events and financial 
performance. These forward-looking statements are  subject to certain risks and
uncertainties, including  those discussed below, that could cause actual
results  to differ materially from historical results or those  anticipated. 
In this report, the words "anticipates,"  "believes," "expects," "intends,"
"future" and similar  expressions identify forward-looking statements.  
Readers are cautioned not to place undue reliance on  these forward-looking
statements, which speak only as of the date hereof.


Item 1. Business  

 The Vantive Corporation ("Vantive" or the "Company") is a leading provider of
front-office  automation software that automates sales and  marketing, call
centers, field service, help desk and  quality assurance operations.  These
integrated front- office software applications, called the Vantive  Enterprise,
are designed to enable businesses to  attract, acquire and retain customers. 
The front- office applications comprising Vantive Enterprise are  built using a
component-based, multi-tier architecture  and a common data model.  Vantive
Enterprise  applications may also be used through a Web-based  browser,
providing the end-user access to the software  outside the traditional office
environment.  Vantive  Enterprise software may be used independently or as 
part of an integrated, enterprise-wide, front-office  automation system.  The
Company believes that  businesses implementing an integrated front-office 
automation system can better manage customer  relationships by sharing valuable
customer information  throughout the organization.  The Company's front- office
software applications have been deployed by  businesses in a broad range of
industries, including  software, communications, consumer products, finance, 
outsourcing/services, personal computer hardware,  healthcare, manufacturing,
medical products, public  sector/regulated industry, online services, consumer 
goods and retail.  

Market Opportunity  

Intensifying global competition has increased the  need for businesses to focus
on growth by implementing  a Customer Asset Management strategy.  This strategy
 is focused on improving long-term customer loyalty and  increasing revenue
through the profitable acquisition  and retention of customers.  As satisfied
customers  are more likely to become repeat and loyal customers,  every stage
of the customer life cycle is critical to  achieving total customer
satisfaction.  According to  the Harvard Business Review March-April 1996,
"U.S.  corporations (now) lose half of their customers in  five years."
Additionally, according to Gartner Group,  many businesses report that sales
and marketing  expenses required to attract new customers are rising.   As a
result of these trends, businesses are focusing  on the Customer Asset
Management strategy of  attracting, acquiring, retaining and leveraging 
customers profitably.  Customer Asset Management is  based on the axiom that
customers are the most  valuable assets of any business.  This strategy moves 
beyond the traditional management structure of  independent, disconnected sales
and marketing,  customer service and information systems to integrated 
front-office systems.  An integrated front-office  system can improve the
entire interaction between a  business and its customers through the seamless 
integration of people, processes and systems.

Throughout the customer life cycle, a business has  multiple points of customer
interaction, including  sales and marketing, customer support call centers and 
field service operations.  For example, customers may  first come in contact
with an organization through the  sales and marketing departments when they
purchase a  product.  Customers may continue to have contact with  the business
through the technical support center and  field service departments if support
and service are needed.  Customers may also have additional contact  with the
sales and marketing and call center  departments if they seek to purchase
additional  products and services.  

Many businesses are recognizing a significant  opportunity to collect and
leverage the information  gathered at customer interaction points to capitalize
 on sales opportunities and improve customer service.   In turn, this leads to
increased customer loyalty and  revenue opportunities.  These businesses are
moving  toward replacing their existing, isolated systems with  integrated
front-office systems designed to automate  sales and marketing, call centers,
field service operations, internal help desk functions and quality  assurance.

As the demand for front-office automation systems  rises, many independent
software vendors have emerged  to provide single point solutions, or solutions 
targeted at specific segments of the front-office  market such as sales, call
centers, or field service  operations.  In most cases, these single point 
solutions do not allow businesses to adequately  leverage and access common
customer information across  all customer interaction points.  

Instead, businesses are demanding integrated front- office automation software
that allows users to access  and leverage critical customer information across
all customer interaction points.  For example, businesses  are often unable to
effectively address customer  issues or capitalize on sales opportunities when 
customer contacts occur in independent, disconnected  departments that do not
share customer information.   As a result, businesses are restructuring their 
operations to be more customer-focused, shifting from  separate sales and
marketing and customer service  functions to a fully integrated front-office 
automation system.  An integrated front-office system  allows a business to
leverage and access common  customer information during all customer
interactions.   This requires that all departments within the business  use a
common base of customer information for all  customer interactions.

The Company believes that there are a number of  other considerations that
businesses look for in a  front-office automation system.  For example, 
frequently a front-office automation system must be  both customizable and
scalable.  Businesses seek to  customize their front-office automation software
to align with their business processes.  Businesses also  seek software that is
scalable in order to adapt to  business growth and fluctuating numbers of
concurrent  users.  Businesses are also often looking for front- office systems
that can integrate with back-office,  enterprise resource planning (ERP)
systems such as  finance, human resources and manufacturing.  

The Company believes that businesses are also  looking for front-office
automation systems that are  Web-enabled.  The ability to access front-office 
automation software over the Web may simplify the  installation and maintenance
of the software, which  may reduce total cost of ownership.  Web access also 
provides greater functionality and access to end- users, allowing them to
electronically request  products and services and submit information directly 
to the business via the Web.  Businesses are also  demanding ease of
accessibility to front-office software through mobile, data synchronization and
 cellular technology.  

The Company believes that the marketplace today  seeks an integrated,
Web-enabled, mobile front-office  solution that will allow users to leverage
and access  real-time customer information from all customer touch  points. 
Front-office automation, combined with a  Customer Asset Management strategy,
allows businesses to move beyond an isolated, departmental view of the 
customer and leverage valuable customer information to  increase customer
loyalty and revenue.  

Vantive Solution 

Vantive is a leading software provider in the  front-office automation
software market through its  integrated suite of software applications called 
Vantive Enterprise.  Vantive Enterprise enables  organizations to address
specific needs of many  aspects of customer interaction, on departmental or 
enterprise-wide levels, or both.  The software  applications that comprise
Vantive Enterprise are  designed to automate and integrate sales and 
marketing, customer support call centers, field  service, help desk operations
and quality assurance.   Vantive's strategy is to provide its users with an 
integrated front-office automation software solution.   Vantive also believes
that combining an enterprise- wide Customer Asset Management strategy with an 
integrated front-office automation system will enable  a business to more
effectively manage each customer interaction.  

Complete Suite of Integrated Front-Office  Automation Software.   Vantive
Enterprise is a complete  suite of Web-enabled, client/server software 
applications and is the Company's integrated front- office automation
solution.  These applications enable  businesses to leverage customer
information on an  enterprise-wide basis, ensuring that the right  customer
information goes to the right person at the  right time.  Vantive Enterprise
currently includes  Vantive Sales, Vantive Support, Vantive FieldService, 
Vantive Inventory, Vantive Procurement, Vantive  HelpDesk and Vantive Quality.
 Each front-office  software module provides easy-to-use, "best-in-class" 
functionality for each of the respective segments of  the front-office market.
 Vantive Enterprise provides  the customer with a single integrated
front-office  solution to help automate and manage the complete  customer life
cycle.  While Vantive software  applications are designed to be implemented
together,  each can also be deployed as a stand-alone system for  a specific
functional area of the front-office market  such as sales and marketing,
customer support call  centers, field service, help desk and quality 
assurance.  In addition, the Company has completed  out-of-the-box
integrations with applications marketed  by PeopleSoft, Inc. and Oracle
Corporation ("Oracle")  which support integrated front-office and back-office 
business processes.  

Customizable.  Vantive Enterprise is highly  customizable using Vantive Object
Studio, a set of  application-specific customization tools that allows  users
to modify their application without changing  source code.  This enables
businesses to customize  applications for their own business models, by 
tailoring the user interface, making modifications to  the business rules and
processes and extending the  application.  This capability allows businesses
to  capture customer information collected by the business  to accommodate
their specific business needs.   Additionally, businesses can modify the
applications  as their business needs change.

Scalable, Enterprise-Wide Solution.  Vantive's  products address a wide range
of market needs, from  departmental to enterprise-wide requirements, from 
single point solutions to fully integrated front- office software
applications.  This scalability  represents a key competitive advantage in
addressing  the front-office automation market by allowing  businesses to
deploy applications for a growing number  of users, while also fully
maintaining system  performance.  Vantive Enterprise applications have  been
implemented at the departmental and enterprise- wide levels, supporting from
10 to more than 10,000  registered or named users.

Web-Enabled Functionality.  The Company's VanWeb  product allows access to
Vantive's applications from  the World Wide Web.  VanWeb leverages the Vantive
 Dynamic Dictionary, to preserve workflow rules, data  integrity and
permission schemes when executing  Vantive applications across the Web. 
VanWeb is  designed to provide "self service" functionality by  allowing
customers to access information and request  products and information from the
business through the  Web.   By leveraging the Web, Vantive Enterprise 
extends its usefulness beyond the business, to its  most important asset, its
customers.

Mobile Solutions.  In addition to supporting LAN,  WAN and Internet access,
Vantive Enterprise also  supports mobile users through Vantive On-The-Go and 
Vantive MiniVan.  Mobile users may seamlessly access  Vantive Sales through
Vantive On-The-Go, enabling  mobile users to benefit from the same
functionality, performance, real-time upgrades and data access  capabilities
as individuals on the internal corporate  network.  Upon reconnecting with the
corporate  network, the Company's software will automatically  reconcile
differences between the data on the mobile  users' client and the corporate
database.  The  Company's applications also can be accessed through  Vantive
MiniVan, which is enabled by Unwired Planet,  Inc.'s character-based Web
browser that operates on  Cellular Digital Packet Data (CDPD) enabled cellular
 telephones and the 3Com Corporation PalmPilot with a  wireless modem.  The
Company believes that using this  technology will further enhance the ability
of mobile  users to easily access key customer information.

Strategy

Vantive's strategy is to become the leading  supplier of front-office
automation software that  enables businesses to improve customer acquisition
and  retention.  The following are the key elements of the  Company's strategy.

Increase the Depth and Breadth of Front-Office  Automation Applications. 
Vantive has, since its  inception, focused on customer support, help desk and 
quality assurance applications.  Recently, the Company  has developed and
released broader functionality in  its sales, marketing and field service
applications to  enhance its front-office automation product offering.   The
Company believes it has made significant advances  in sales and field service
functionality with the  release of Vantive Sales 7 and the acquisition of 
Innovative Computer Concepts, Inc. ("ICC").   Additional sales functionality
provided by Vantive  Sales 7 includes automatic information distribution 
through Web-based "push" technology, "best-of-breed"  personal information
management integration and  enterprise reporting.  Additional field service 
functionality provided by the ICC acquisition includes  spare parts, inventory
and procurement management.   Vantive believes that its technology
architecture and  common data model provide a competitive advantage when 
adding and integrating key functionality to Vantive  Enterprise.  The
Company's strategy also includes  continuing to add new functionality to its
core suite  through internal development as well as through  licensing
"best-of-breed" third party technology.  To  qualify as "best-of-breed," the
Company must determine  that the technology has a clear future market 
direction, is extremely robust and is commercially  supported.

Expand Distribution Channels, Leverage Third Party  Relationships and Build
the Vantive Alliance.   Vantive's sales and marketing strategy is to 
simultaneously expand its direct sales force and  develop additional
relationships with third party  system integrators, consultants, outsourcers, 
resellers and software and hardware suppliers.  By  increasing the number of
direct field sales  representatives, the Company intends to improve its 
geographic reach and existing account coverage.  The  Company has also
developed relationships with several  high-end integrators and resellers,
including Deloitte  & Touche, LLP, The Bentley Company, Cambridge  Technology
Partners, EDS, HBO and Company, Lucent  Technologies, KPMG Peat Marwick, LLP,
Price  Waterhouse, LLP and Renaissance Worldwide.  The  Company intends to
continue to develop relationships  with other third party resellers in the
future.  In  addition, the Company will focus certain field sales 
representatives and leverage its relationships with  third parties into
vertical markets that the Company  believes value Vantive's general, or
"horizontal,"  functionality as well as the Company's and its  partners'
industry expertise in implementing front- office automation systems in
vertical markets.   Examples of such markets include healthcare, finance, 
communications and utilities.  The Company intends to  continue to develop
relationships with other strategic  business partners in order to grow the
Vantive  Alliance.  The Vantive Alliance is the Company's  partner strategy of
building an alliance of industry- leading companies around its front-office
software  products in order to deliver value-added products,  services and
technology to the front-office market.   The Vantive Alliance is currently
made up of over 100  system integrators, consultants, outsourcers,  resellers,
software and hardware suppliers.  

Extend Enterprise Integration.  Vantive's strategy  is to enable its
front-office automation software  applications to be easily integrated with
back-office  systems, such as finance, manufacturing and human  resources,
through strategic partnerships with ERP  vendors and through internal
development.  The Company  has completed integrations with leading back-office
 vendors such as PeopleSoft and Oracle.  The Company's  strategy also includes
working with third party  integrators such as Cambridge Technology Partners, 
EDS, Lucent Technologies and Renaissance Worldwide as  well as working with
third party providers of  integration software, such as CrossWorlds Software, 
Inc. and Active Software, Inc. which will provide  customers the ability to
link the Vantive Enterprise  to a broad range of applications.  The Company
intends  to continue to integrate back-office applications with  other Vantive
front-office software applications.  The  Company has also developed
relationships with several  high-end integrators to further facilitate
integration  between Vantive's applications and other applications.   The
Company is also a member of the Cooperative  Applications Initiative of Oracle
Corporation.

Leverage Scalability.  The Company's strategy is to  continue to develop
scalable front-office applications  that may be effectively utilized by
businesses of  virtually all sizes, with varying number of users, 
applications and levels of integration.  In addition,  to effectively maintain
the scalability of its  solutions, the Company's long-term strategy is to 
design component-based software that leverages  additional transaction
processing capabilities into  its solutions as the industry evolves in that
direction.

Leverage the World Wide Web.  As the Web continues  to increase in importance
for businesses and their  customers, Vantive's strategy is to continue to 
leverage Web-enabled functionality in its front-office  automation software
applications.  Vantive released  VanWeb 3 and a set of front-office applets in
1997  based on Java, a software language developed by Sun  Microsystems.  The
Company believes these new  technologies will enhance the functionality, 
scalability and customizability of the Company's Web- based front-office
automation software applications as  well as expand its "self service" and
"assisted  buying" application capabilities.  They will also  allow the
Company's customers to more easily take  advantage of new network computer
architectures from  companies such as Oracle Corporation, Sun  Microsystems,
Microsoft Corporation and Netscape  Communications Corporation.  The Company
has recently  announced Vantive Partner Desktop, the Company's Web  strategy
for building customized "Web channels" for  partners, sales professionals and
prospects.  The  Company believes that this strategy will allow a  business to
deliver personalized information to its  partners, employees and prospects
through an industry- standard Web browser.  

Extend Mobility of User.  The Company, recognizing  that businesses are
demanding the availability of  front-office automation software for their
mobile  users, extended the reach of its Vantive Sales product  to the mobile
user through Vantive On-The-Go and  Vantive MiniVan.  Users can also access
Vantive  database information through a character-based Web  browser developed
by Unwired Planet, Inc.  operating  through CDPD-enabled cellular telephones
or a  PalmPilot with a wireless modem.  Each of these  solutions has further
enhanced the ability of users to  be mobile when accessing the Company's
front-office  automation software applications.  Vantive's strategy  is to
further benefit mobile users by applying these  benefits to each of its other
applications.

Enable Rapid Application Deployment.  Vantive's  strategy is to continue to
use and enhance the  methodology developed for its own consultants, third 
parties and customers to rapidly deploy front-office  automation software
applications.  Vantive Enterprise  front-office applications are designed to
be easily  customized.  As a result, a business can deploy  applications
quickly, typically in a few months, and  still refine the applications as
their business needs  change.  The customization of an application can be 
done using the Vantive Object Studio as well as with  third party technology
such as Visual Basic for  Applications.  User interface customizations are
done  using VanDesign, a layout tool designed to customize  the look and feel
of Vantive applications without  additional coding.  VanDesign also supports
ActiveX, a  software architecture for building software components  developed
by Microsoft Corporation.  Through ActiveX,  Vantive applications can easily
incorporate third  party software components developed to the ActiveX 
standard.  The Company believes that these new  technologies will enable the
rapid development of more  sophisticated and ergonomic software.

The foregoing statements regarding the Company's  strategy, expectations and
intentions are forward- looking statements and actual results and activities 
may vary substantially depending upon a variety of  factors, including the
development of emerging markets  for front-office automation software,
competition,  technological change, changing customer needs,  evolving
industry standards, any product development  delays and the ability of the
Company to manage any  future growth and new distribution channels.  Please 
see the "Risk Factors" section for further  information.  

Products and Technology 

The Vantive Enterprise is an integrated suite of  front-office software that
automates sales and  marketing, customer support call centers, field  service,
help desk and quality assurance operations.   Vantive designed Vantive
Enterprise to be fully  scalable and customizable to evolve and align with the
 growth and processes of different businesses.  Vantive  Enterprise products
share a common database and  application architecture along with common
facilities  for intelligent workflow routing, advanced problem  solving and
measurement reporting.  By building the  applications using a component-based,
multi-tier,  application architecture, Vantive believes its  applications are
more scalable and easier to maintain  than competing two-tier implementations.
 This  architecture also results in a thinner client, less  network traffic,
more efficient use of database  resources and is well suited for Web-based 
applications.  Vantive Enterprise consists of the  following applications,
each of which can be purchased  and implemented separately or integrated in
any  combination.

Vantive Sales is a front-office software  application designed to automate the
entire sales and  marketing process.  Vantive Sales enables companies to 
practice Knowledge-Enabled Selling.  Knowledge-Enabled  Selling is the
Company's sales solution for  distributing the collective knowledge,
information,  experience and expertise of top sales performers to  the entire
sales force.  The Company believes that  Knowledge-Enabled Selling can enhance
sales  performance through effective knowledge sharing,  informed decision
making and improved understanding of  the customer.  Vantive Sales also
enables sales  representatives to align their selling cycles with  their
customer's buying process, provides sales  knowledge-on-demand and increases
sales effectiveness.   Vantive Sales delivers up-to-the-minute sales, product 
and customer information with the Vantive Encyclopedia  and provides a single
source for managing tasks,  contacts, opportunities and scheduling through bi-
directional integration with Microsoft Outlook.   Vantive Sales functionality
includes pipeline and forecast management, account and territory planning, 
quote/product configurations and channel management.   Marketing campaign
management, telesales and lead  tracking are also provided by Vantive Sales. 
Vantive  Sales is also Web-enabled through VanWeb, which  enables customers,
prospects and business partners to  use a standard Web browser to respond to
marketing  campaigns, access sales and product information and  self-enroll in
sales and marketing events.  Using  Vantive On-The-Go, mobile Vantive Sales
users can  access and synchronize data with the corporate  database.  Vantive
MiniVan allows mobile users to  access Vantive Sales via a CDPD-enabled
cellular phone  or PalmPilot with a wireless modem.  Vantive Sales can  be
used independently or as part of an integrated,  enterprise-wide front-office
automation system.  

Vantive Support is a front-office software  application designed to automate
and provide end-to- end management of call center and customer support 
operations.  Vantive Support is designed to help  companies improve customer
retention, build customer  loyalty and increase call center revenue.  Vantive 
Support provides a complete solution for customer  service call centers
including automated call  tracking, entitlement processing, workflow, problem 
resolution, revenue generation, performance  measurement, advanced research
tools and service  management.  Vantive Support also logs and tracks  customer
issues and requests, routes leads to sales  and marketing departments and
supports customer access  via phone, fax, email and the Web.  Business rules
in  Vantive Support automatically route customers to the  right call center
agent and provide automatic  escalations and notifications.  Vantive Support
can also be used to generate call center revenue through  proactive service
contract renewals, upgrades and  cross-selling functionality.  Vantive Support
also  provides Web-based, self-service options through  VanWeb, which may
increase call center agent  productivity by reducing the number of calls to
the  call center.  Using VanWeb, customers can use a  standard Web browser to
search for resolutions and  submit a case within Vantive Support.  Vantive
Support  can be used independently or as part of an integrated, 
enterprise-wide front-office automation system.

Vantive FieldService, Vantive Inventory and Vantive  Procurement are
front-office automation software  modules designed to manage and enhance field
service  operations.  Vantive field service solutions are  designed to provide
the right people, with the right  parts, at the right time, to service and fix
problems  quickly with minimal intrusion on customers.   Vantive's three field
service modules each play an  integral role as part of a complete field
service  solution and can be purchased and used separately or together.  

Vantive FieldService manages the allocation,  scheduling and dispatching of
service technicians,  service providers and resources.  Vantive FieldService 
allows a business to create detailed work plans that  permit users to evaluate
tasks, materials and skills  and then group them into different types of
services.   Vantive FieldService also generates work orders that  create a
single, detailed information source for  notification, billing and tracking
purposes.  Customer  configurations and Return Material Authorizations  (RMAs)
are also key features in Vantive FieldService.   Field technicians can also
log and track tasks, time,  materials and expenses into Vantive FieldService
from the road using VanWeb.

Vantive Inventory automates the control,  management, tracking and status of
spare parts  inventory.  Vantive Inventory tracks inventory costs  such as
weighted average, standard costs, last  purchase cost, LIFO and FIFO.  It also
provides up-to- the minute stock status information and complete  inventory
analysis and usage models, which allow users  to make informed decisions about
managing spare parts.   Vantive Inventory is specifically designed to support 
businesses with multiple product lines by providing  cataloging and
cross-referencing functionality and  tools for locating part status and
supporting multiple  transaction types.  

Vantive Procurement manages and streamlines the  purchase and receipt of spare
parts from external  departments and suppliers.  Vantive Procurement  provides
spare parts status, vendor availability and  detailed goods information to
assist in the  requisition and procurement process.  The Vantive  Procurement
event tracking system automatically  generates orders to fill requisitions and
tracks  purchase orders placed against the request.  Vantive  Procurement also
streamlines the purchase order  process by bringing together on-line master
records,  requirements and requisitions in real-time.  Purchase  orders can be
generated through requirements,  requisitions, manually or through an external
system  interface.  Vantive Procurement also allows users to  track
requisitions through general requirement  functions, which determine whether
combined orders can  take advantage of cost-saving options such as volume 
discounts and joint shipping.  

The Vantive field service software modules support  complex global
organizations through advanced  logistics functionality that allows users to
track  centralized and regional operations at different  levels.  Businesses
can also create "cross- hierarchical business entities" that allow two similar
 departments' warehouses in two different divisions to  be treated as one
department in the Vantive system.   Vantive field service modules also
integrate with  back-office systems such as manufacturing,  distribution and
accounting to provide a "full-view"  of a business's global field service
operations.

Vantive HelpDesk is a front-office software  solution designed to automate
internal help desk  operations.  Vantive HelpDesk enhances customer 
interactions by improving employee productivity,  satisfaction and retention. 
Vantive HelpDesk tracks  and resolves employee issues, suggestions and
requests  for assistance.  Vantive HelpDesk manages hardware and  software
configurations, catalogs and tracks company  assets and supports third party
"knowledge packs."   Vantive HelpDesk maintains employee history, provides 
Web-enabled self-service options and supports the  entire enterprise
infrastructure including mainframe  systems, client/server systems, networks
and  telecommunications equipment.  Vantive HelpDesk  enables end-to-end
management of technical support  issues by providing a single information
repository  that includes data, business rules and workflow.   Vantive
HelpDesk can be used independently or as part  of an integrated,
enterprise-wide front-office  automation system.

Vantive Quality is a front-office software solution  designed to collect and
leverage customer feedback on  products and services.  This feedback can be
leveraged  to design, build and deliver high-quality, customer- aligned
products and services.  Vantive Quality  integrates product quality and
enhancement processes  across the entire enterprise, allowing engineering and 
information technology departments to track and  resolve product defects.  The
software is used to  identify product failures and defects, create 
enhancement requests and build documentation and track  product information. 
Vantive Quality also assists  companies with ISO 9000 compliance by providing
data  and information on product fault, fix, ownership and  action history. 
Vantive Quality can be used  independently or as part of an integrated,
enterprise- wide front-office automation system.

Vantive also offers several other software products and  technologies that
enhance the functionality and facilitate the  implementation, integration and
modification of Vantive Enterprise  front-office automation software
applications.  

VanWeb is a front-office software application designed to  enable anyone with
an industry-standard Web browser to access  Vantive Enterprise applications
through the World Wide Web.   VanWeb empowers businesses to use the Web to
attract, retain and  leverage customers by using the Web to collect leads and
provide  self-service options for Vantive Enterprise products.  VanWeb can  be
combined with Vantive Sales to enhance a company's sales and  marketing
strategies by automatically distributing leads generated  on a company's Web
site to its sales force.  VanWeb also allows  customers, prospects and
business partners to use a standard Web  browser to respond to marketing
campaigns, access sales and  product information and interact with customer
service call  centers.  Combined with Vantive Support and Vantive HelpDesk,
the  company believes that VanWeb can significantly improve customer 
satisfaction through Web-based self-service options.  VanWeb  allows
authorized customers and employees to resolve open support  cases, review
product availability and access competitive  information via their Web
browsers.  

Vantive On-The-Go is Vantive's mobile computing product.   Vantive On-The-Go
seamlessly accesses corporate database  information, enabling mobile users to
experience the same  functionality, performance, real-time upgrades and data
access  capabilities as individuals working on the internal corporate 
network.  Vantive On-The-Go handles complex data synchronization  and conflict
management, ensuring accurate and complete customer  data.  Designed with the
industry leading mobile database  technology, SQLAnywhere, instead of
proprietary data  synchronization engines, Vantive On-The-Go provides
significantly  faster data synchronization than competing mobile applications.

Vantive MiniVan is a software application designed to give  mobile users
access to Vantive Enterprise applications from a  CDPD-enabled cellular phone
or PalmPilot with a wireless modem.   Mobile Vantive users can access
contacts, opportunities, tasks and  sales leads without the typical
constraints of laptop PCs and  tethered modem connections.  Vantive MiniVan
enables users to  access, query and update customer and prospect information 
captured and maintained in the Vantive Enterprise.  

Vantive Object Studio is a software package designed to help customize,
deploy and administer Vantive Enterprise software  applications.  The Vantive
Object Studio leverages ActiveX Control  technology, provides a
"drag-and-drop" design environment and  allows a company to develop Vantive
applications once and deploy  them universally to tethered, mobile and Web
clients.  The Vantive  Object Studio includes two software tools: VanDesign
and VanTools.   VanDesign is an advanced graphical object builder that allows 
companies to easily develop and customize Vantive Enterprise  software. 
VanTools is a graphic deployment environment that makes  it easy to maintain
system security, add and delete users and  modify workflow and reports.  

Vantive Object Architecture is a component-based, multi-tier  architecture that
serves as the foundation for all Vantive  software applications and technology. 
The Vantive Object  Architecture provides proven reliability and scalability to 
protect mission-critical systems and software.  The Vantive Object  Architecture
is designed to reduce network traffic, increase  system performance and enhance
employee productivity.  Vantive has  also pioneered a component-based software
approach that allows for  rapid delivery and deployment of the latest,
best-of-breed  software technology to the desktop.  The component-based approach
also allows Vantive to deliver state-of-the-art, ergonomic interfaces for all
Vantive software solutions.  

Multi-Tier Computing.  The Vantive Object Architecture utilizes  a multi-tier
approach that allows the application processing to be  partitioned on the
appropriate tier.  The architecture provides a  clean break between the
presentation services, application  business processing and database services. 
The Company believes  that this approach enhances system performance and
scalability and  is production-proven with hundreds of production sites, many 
supporting thousands of concurrent users.

Intelligent Components.  The Vantive Object Architecture is an  object-based
infrastructure that enables the integration of front- office software
components. The Company believes that this  component-based approach provides
Vantive and its customers with  the ability to rapidly develop and deploy
critical business  solutions.  These intelligent components encourage reuse
and  provide an integration infrastructure that allows other systems to 
leverage Vantive functionality via a variety of programming  languages.

Ergonomic Interface.  The Vantive Object Architecture provides  for
state-of-the-art, ergonomic interfaces on a variety of  computing devices.  This
allows Vantive Enterprise to be provided  on the form factor that best fits the
individual needs of the  user.  The interface options include the Web, mobile,
tethered  LAN/WAN users, cellular phones and PDAs such as the PalmPilot and 
Microsoft CE devices.  

VanAPI is an applications program interface designed to  facilitate integration
with new technologies and legacy and back- office systems.  VanAPI provides a
simple, user-friendly  programming interface that allows a company to establish 
interactive, bi-directional connections between Vantive Enterprise  products and
other software applications such as manufacturing,  finance and accounting
systems.  Standard programming languages  such as C, C++, Java, Perl and Visual
Basic can use VanAPI.  

Sales and Marketing

The Company markets and sells its software and services in the  United States
primarily through a direct sales organization.  To  support its sales force, the
Company conducts comprehensive  marketing programs which include direct mail,
public relations,  Web-based lead generation, advertising, trade shows,
seminars,  ongoing customer communications programs and an annual, 
international user group conference.  The Company also  participates in
industry programs and forums and establishes and  maintains close
relationships with recognized industry analysts. 

The Company's sales cycle begins with the generation of a sales  lead, which is
followed by qualification of the lead, an analysis  of the prospective
customer's needs, multiple presentations and/or  product demonstrations to the
prospective customer and ends with  contract negotiation and commitment. 
While the duration of the  sales cycle varies substantially from customer to
customer, it  frequently lasts between six and nine months.

The Company markets its products outside of the United States  through
wholly-owned subsidiaries and independent distributors.   As of December 31,
1997, the Company had wholly-owned subsidiaries  in Australia, Canada, France,
Germany, the Netherlands, Singapore  and the United Kingdom and distributors
in Argentina, Brazil,  Chile, Columbia, Israel, Japan, Mexico, New Zealand,
Scandinavia,  South Korea, Spain and Venezuela.  In addition to marketing and 
selling the Company's products, the distributors provide technical  support to
their customers.  

The sales and marketing organization consisted of 211 employees  as of December
31, 1997.  The domestic sales staff is based at the  Company's corporate
headquarters in Santa Clara, California and  more than 15 field sales offices
located in Atlanta, Georgia;  Baltimore, Maryland; Bethel, Connecticut; Boston,
Massachusetts;  Boulder, Colorado; Chicago, Illinois; Columbus, Ohio; Dallas, 
Texas; Denver, Colorado; Iselin, New Jersey; Irvine, California;  King of
Prussia, Pennsylvania; Los Angeles, California;  Manchester, New Hampshire;
McLean, Virginia; Newport Beach,  California; New York, New York; Orem, Utah;
Overland Park, Kansas;  Portland, Oregon; San Diego, California; Seattle,
Washington; and  Washington, D.C.

An important element of the Company's distribution strategy is 
to expand its direct sales force, to create additional 
relationships with third parties, to dedicate certain direct sales 
resources and leverage third party relationships for greater 
access into certain vertical markets.  The ability of the Company 
to achieve significant revenue growth in the future will depend, 
in part, on its success in executing this strategy.  The Company 
is currently investing and intends to continue to invest 
significant resources to develop its sales strategy, which could 
adversely affect the Company's operating margins.  In this regard, 
the Company has recently hired and continues to hire significant 
numbers of direct sales personnel and has developed relationships 
with several high-end integrators and resellers, including 
Deloitte & Touche, LLP, The Bentley Company, Cambridge Technology 
Partners, EDS, HBO and Company, Lucent Technologies, KPMG Peat 
Marwick, LLP, Price Waterhouse, LLP and Renaissance Worldwide.  
Competition for sales personnel is intense and there can be no 
assurance that the Company can retain its existing sales personnel 
or that it can attract, assimilate and retain additional highly 
qualified sales personnel in the future.  The strategy also 
depends, in large part, on attracting and retaining appropriate 
third party relationships.  There also can be no assurance that 
the Company will be able to attract and retain appropriate high-
end integrators, resellers and other third party distributors to 
market the Company's products effectively.  In addition, the 
Company's agreements with these third parties are not exclusive 
and in many cases may be terminated by either party without cause 
and many of these third parties sell or co-market competing 
product lines.  Therefore, there can be no assurance that any of 
these parties will continue to represent or recommend the 
Company's products.  There also can be no assurance that the 
Company will effectively identify key vertical markets.  The 
inability to recruit, or the loss of, important direct sales 
personnel, high-end integrators, resellers or other third party 
distributors, or the failure to effectively identify key vertical 
markets could have a material adverse effect on the Company's 
business, results of operations and financial condition.  

The foregoing statements regarding the Company's intention to 
expand its distribution channels are forward-looking statements; 
and actual results and activities may vary substantially depending 
upon a variety of factors, including but not limited to, those 
contained in this paragraph.

Product Development 

The Company has historically developed and expects to continue 
to develop its products in conjunction with its existing and 
potential customers.  Several products and enhancements to 
existing products are currently in development.  The evolution to 
component based software will also significantly influence 
Vantive's future product direction.  The Company believes 
businesses will expect to be able to utilize portions of the 
Company's integrated front-office software solution and 
effectively integrate them with software objects developed by 
other software vendors.

As of December 31, 1997, there were 117 employees on the 
Company's product development staff.  In addition, the Company 
regularly supplements its workforce with consultants.  The 
Company's research and development expenditures in 1995, 1996 and 
1997 were $3.3 million, $7.3 million and $17.5 million, 
respectively and represented 13.2%, 11.3% and 14.9% of revenues, 
respectively.  The Company expects that it will continue to commit 
substantial resources to product development in the future.

 The front-office automation software market is subject to 
rapid technological change, changing customer needs and frequent 
new product introductions and evolving industry standards that may 
render existing products and services obsolete.  As a result, the 
Company's position in its existing markets or other markets that 
it may enter could be eroded rapidly by product advances.  The 
life cycles of the Company's products are difficult to estimate.  
The Company's growth and future financial performance will depend 
in part upon its ability to enhance existing applications, develop 
and introduce new applications that keep pace with technological 
advances, meet changing customer requirements, respond to 
competitive products and achieve market acceptance.  For example, 
the Company's customers have adopted a wide variety of hardware, 
software, database, Internet-based and networking platforms and as 
a result, to gain broad market acceptance, the Company must 
continue to support and maintain its products on a variety of such 
platforms.  The Company's future success will depend, in part, on 
its ability to address the increasingly sophisticated needs of its 
customers by supporting existing and emerging hardware, software, 
database, Internet-based and networking platforms and by 
developing and introducing enhancements to its products and new 
products on a timely basis that keep pace with technological 
developments, evolving industry standards and changing customer 
requirements.  There can be no assurance that the Company will be 
able to successfully change other aspects of its business, such as 
its distribution channels or cost structure, if technological 
changes in its market, including distribution through the 
Internet, require such change.  The Company's product development 
efforts are expected to require substantial investments by the 
Company in product development and testing.  There can be no 
assurance that the Company will have sufficient resources to make 
the necessary investments.  The Company has in the past 
experienced development delays and there can be no assurance that 
the Company will not experience such delays in the future.  There 
can be no assurance that the Company will not experience 
difficulties that could delay or prevent the successful 
development, introduction or marketing of new or enhanced 
products, including but not limited to Vantive Enterprise 7.5, 
Vantive Enterprise 8 and VanWeb 4.  In addition, there can be no 
assurance that such products will meet the requirements of the 
marketplace and achieve market acceptance or that the Company's 
current or future products will conform to industry requirements.  
If the Company is unable, for technological reasons, to develop 
and introduce new and enhanced products in a timely manner, the 
Company's business, results of operations and financial condition 
could be materially adversely affected.

Software products as complex as those offered by the Company 
may contain errors that may be detected at any point in the 
products' life cycles.  The Company has in the past discovered 
software errors in certain of its products and has experienced 
delays in shipment of products during the period required to 
correct these errors.  There can be no assurance that, despite 
testing by the Company and by current and potential customers, 
errors will not be found, resulting in loss of, or delay in, 
market acceptance and sales, diversion of development resources, 
injury to the Company's reputation, or increased service and 
warranty costs, any of which could have a material adverse effect 
on the Company's business, results of operations and financial 
condition.

The foregoing statements regarding introductions of the 
Company's products under development,  proposed enhancements and 
the features included in such products or enhancements are 
forward-looking statements, and the actual release dates for such 
products or enhancements could differ materially from those 
projected as a result of a variety of factors, including but not 
limited to, those contained in the following paragraphs.  

Competition

The front-office automation software market is intensely 
competitive, highly fragmented and subject to rapid change.  
Because the Company offers multiple applications that can be 
purchased separately or integrated as part of Vantive Enterprise, 
the Company competes with a variety of other businesses depending 
on the target market for their applications software products.  
These competitors include a select number of businesses targeting 
the enterprise-level and department-level front-office markets, 
such as Astea International, Inc., Aurum Software, Inc. (a 
subsidiary of The Baan Company), Clarify, Inc., Onyx Software, 
Scopus Technology, Inc. and Siebel Systems, Inc.  In March 1998, 
Siebel Systems, Inc. and Scopus Technology, Inc. announced that 
they had entered into a definitive agreement for Siebel to acquire 
all of the outstanding shares of Scopus Technology, Inc.  

  The Company also competes with a substantial number of 
businesses that offer products targeted at one or more specific 
markets, including the customer support market, the help desk 
market, the quality assurance market and the sales and marketing 
automation market, such as Remedy Corporation and Software 
Artistry, Inc.  (which was recently acquired by the IBM 
subsidiary, Tivoli Systems, Inc.).  The Company believes that such 
point solution providers may expand their product offerings, which 
could provide increased competition for the company across its 
market segments.  The Company also competes with third party 
professional service organizations that develop custom software 
and with internal information technology departments of customers 
that develop customer interaction applications.  Among the 
Company's current and potential competitors are also a number of 
large hardware and software businesses that may develop or acquire 
products that compete with the Company's products.  In this 
regard, SAP AG, Oracle and The Baan Company have each introduced 
sales automation and/or customer support modules as part of their 
application suites.  Oracle has announced the creation of a 
network of third party dealers that will sell Oracle's application 
suites exclusively to medium-sized businesses.  

The Company expects that large software vendors in the 
enterprise resource planning market will continue to enter and 
pursue the front-office automation market.  These competitors have 
significantly greater financial, marketing, service, support, 
technical and other resources than the Company.

The Company also expects that competition will increase as a 
result of software industry consolidations.  Current and potential 
competitors have established or may establish cooperative 
relationships among themselves or with third parties to increase 
the ability of their products to address the needs of the 
Company's prospective customers.  Accordingly, it is possible that 
new competitors or alliances among competitors may emerge and 
rapidly acquire significant market share.  The Company also 
expects that competition may increase as a result of both new 
software start ups entering the market as well as existing 
software industry vendors which may be planning to enter the 
market for front-office applications.  Increased competition is 
likely to result in price reductions, reduced operating margins 
and loss of market share, any of which could materially adversely 
affect the Company's business, results of operations and financial 
condition.  Many of the Company's current and potential 
competitors have significantly greater financial, marketing, 
service, support, technical and other resources than the Company.  
As a result, they may be able to respond more quickly to new or 
emerging technologies and changes in customer requirements, or to 
devote greater resources to the development, promotion, service 
and sale of their products than can the Company.  There can be no 
assurance that the Company will be able to compete successfully 
against current and future competitors or that competitive 
pressures faced by the Company will not materially adversely 
affect its business, results of operations and financial 
condition.

The Company believes that the principal competitive factors 
affecting its market include product features such as 
adaptability, scalability, ability to integrate with products 
produced by other vendors, functionality, ease of use and such 
other factors as product reputation, quality, performance, price, 
customer service and support, the effectiveness of sales and 
marketing efforts and company reputation.  Although the Company 
believes that its products currently compete favorably with 
respect to such factors, there can be no assurance that the 
Company can maintain its competitive position against current and 
potential competitors, especially those with significantly greater 
financial, marketing, service, support, technical and other 
resources.

Intellectual Property and Other Proprietary Rights

The Company's success is heavily dependent upon proprietary  technology.  The
company relies primarily on a combination of  copyright, trademark and trade
secrets laws, as well as  confidentiality procedures and contractual
provisions to protect  its proprietary rights.  There can be no assurance that
such  measures will be adequate to protect the Company from infringement  of
its technology.  The Company presently has no patents or patent  applications
pending.  Despite the Company's efforts to protect its  proprietary rights,
attempts may be made to copy aspects of the  Company's products or to obtain
and use information that the  Company regards as proprietary.  In particular,
as the Company  provides its licensees with access to the proprietary
information  underlying the Company's licensed applications, there can be no 
assurance that licensees or others will not develop products which  infringe
the Company's proprietary rights.  Policing unauthorized  use of the Company's
products is difficult, and while the Company  is unable to determine the
extent to which piracy of its software  products exists, software piracy can
be expected to be a persistent  problem.  In addition, the laws of some
foreign countries do not  protect the Company's proprietary rights to as great
an extent as  do the laws of the United States.  There can be no assurance
that  the Company's means of protecting its proprietary rights will be 
adequate or that the Company's competitors will not independently  develop
similar technology.  The Company believes that competitors  regularly evaluate
and try to emulate its products.  The Company is  not aware that any of its
products infringe the proprietary rights  of third parties, although the
Company has in the past, and may in  the future, receive communications
alleging possible infringement  of third party intellectual property rights. 
The Company expects  that software product developers will increasingly be
subject to  infringement claims as the number of products and competitors in 
the Company's target markets grows and the functionality of  products in such
markets overlaps.  Any such claims, with or  without merit, could be
time-consuming, result in costly  litigation, cause product shipment delays or
require the Company to  enter into royalty or licensing agreements.  Such
royalty or  licensing agreements, if required, may not be available on terms 
acceptable to the Company or at all, which could have a material  adverse
effect upon the Company's business, results of operations  and financial
condition.
<PAGE>

Employees

As of December 31, 1997, the Company had 451 full-time 
employees, including 211 in sales and marketing, 29 in consulting, 
117 in research and development, 60 in general and administration 
and 34 in client services.  Of these employees, 42 were located 
outside the United States, principally in the United Kingdom, 
France, the Netherlands and Germany.  The remaining employees were 
located in the United States.  None of the Company's employees is 
represented by a labor union.  The Company has experienced no work 
stoppages and believes its relationship with its employees is good.  
In addition, the Company regularly supplements its workforce with 
consultants.  As of December 31, 1997, the Company employed 48 
full-time equivalent consultants.

Competition for qualified personnel in the Company's industry is 
intense.  The Company believes that its future success will depend 
in part on its continued ability to hire, assimilate and retain 
qualified personnel.

<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         As of January 31, 1998, the Company's directors and executive officers
were as follows:

<TABLE>
<CAPTION>
                                                                       Director
                                                                         or
                                                                       Officer
         Name           Age                   Position                  Since
---------------------- ------ ---------------------------------------- -------
<S>                    <C>    <C>                                      <C>
John R. Luongo            48  President, Chief Executive Officer         1993
                              and Director

Roger J. Sippl            43  Chairman of the Board of Directors         1990

Aneel Bhusri              32  Director                                   1996

William H. Davidow        62  Director                                   1991

Kevin G. Hall             39  Director                                   1994

Raymond L. Ocampo Jr.     45  Director                                   1997

Peter A. Roshko           39  Director                                   1991

John M. Jack              43  Chief Operating Officer                    1995

Christopher W. Lochhead   29  Executive Vice President of Strategic      1996
                              Marketing

Garry Hallee              37  Executive Vice President of Engineering    1996

Kathleen A. Murphy        51  Chief Financial Officer                    1995

Michael M. Loo            41  Vice President, Finance                    1993

David Schellhase          34  Vice President and General Counsel         1997

David Jodoin              33  Executive Vice President of Corporate      1997
                              Development

Mary Egan Lorigan         37  Vice President,North America Sales         1998

Marie Alexander           39  Vice President of Client Services          1998


</TABLE>
<PAGE>

John R. Luongo has served as President, Chief Executive Officer 
and a director of the Company since June 1993.  He was an 
independent consultant from November 1992 to June 1993, President, 
Chief Executive Officer and Chairman of the Board of Trifox, Inc., 
a software company, from September 1991 to November 1992, Senior 
Consultant at Merrill, Pickard, Anderson and Eyre, a venture 
capital firm, from September 1990 to June 1991 and Senior Vice 
President International Division at Oracle Corporation from July 
1982 to July 1990.  

Roger J. Sippl is a co-founder of the Company and has served as 
a director of the Company since December 1990 and as Chairman of 
the Board since 1996.  Mr.  Sippl is the founder of Visigenic 
Software, Inc., where he served as Chief Executive Officer from 
January 1993 until its acquisition by Borland International, Inc. 
in March 1998.  Since March 1998, Mr. Sippl has been Chief 
Technology Officer of Borland International, Inc.  Prior to his 
relationship with Visigenic Software, Mr. Sippl founded Informix 
Software in 1980 and served as that company's Chairman of the Board 
until 1992.

Aneel Bhusri has served as a director of the Company since 
December 1996.  He has served in several capacities with 
PeopleSoft, Inc. since August 1993, currently as its Senior Vice 
President of Product Strategy.  From June 1992 to March 1993, Mr. 
Bhusri served as an associate at Norwest Venture Capital.  From 
1988 to 1991 he was a financial analyst in Morgan Stanley's 
Corporate Finance Department.

William H. Davidow has served as a director of the Company since 
July 1991.  He has been a General Partner at Mohr, Davidow Ventures 
since May 1985.  From 1973 to 1985, he held a number of management 
positions at Intel Corporation including Senior Vice President of 
Marketing and Sales.  He also serves as Chairman of the Board of 
Rambus, Inc. and is a director of Power Integrations, Inc. and 
several private companies.  

Kevin G. Hall has served as a director of the Company since May 
1994.  He has served as a General Partner of Norwest Equity 
Partners, IV since August 1993.  Prior to his relationship with 
Norwest Equity Partners, IV, he served as a principal in Brentwood 
Associates, a venture capital firm, from June 1988 to August 1993.

Raymond L. Ocampo Jr. has served as a director of the Company 
since January 1997.  He currently serves as an independent mediator 
of disputes among high technology corporations and is Executive 
Director  of the Berkeley Center for Law and Technology.  He served 
in several capacities with Oracle Corporation from July 1986 to 
November 1996, primarily and most recently as its Senior Vice 
President, General Counsel and Corporate Secretary.  He is a member 
of the board of KQED, the Bay Area public television affiliate, as 
well as several private companies.

Peter A. Roshko has served as a director of the Company since 
July 1991.  Mr. Roshko co-founded and has been a co-member of 
Granite Investments, an investment company, since August 1995.  
From December 1993 to August 1995, Mr. Roshko was a General Partner 
at Cottonwood Ventures, a venture capital firm.  From June 1993 to 
December 1993, Mr. Roshko was an independent investor and 
consultant in the venture capital industry.  Mr. Roshko was a 
General Partner at Mohr, Davidow Ventures from March 1987 to June 
1993.

John M. Jack has served as Chief Operating Officer since January 
1997 and was Vice President, Worldwide Sales of the Company from 
May 1995 to January 1997.  He served as Vice President, Western 
Regional Sales at Sybase Corporation, a client/server software 
company, from April 1991 to April 1995.  From November 1986 to 
April 1991, he held various sales management and sales positions at 
Sybase Corporation.

Christopher W. Lochhead has served as Executive Vice President 
of Strategic Marketing of the Company since June 1996.  He served 
as President and Chief Executive Officer of Always An Adventure, a 
strategy consulting company, from November 1993 to June 1996 where 
he coined the term "Customer Asset Management."  From September 
1991 to November 1993, he was Director of Canada at Platinum 
Software Corporation, a software company.


Garry Hallee has served as Executive Vice President of 
Engineering of the Company since October 1996.  He served as Vice 
President and General Manager at Platinum Technology, a software 
company, from December 1995 to October 1996.  From July 1992 to 
December 1995, he served as Director, Product Development at 
Trinzic, a software company.  From May 1984 to July 1992, he served 
as Chief Technology Officer and Development Manager at Aion, a 
software company.

Kathleen A. Murphy has served as Chief Financial Officer of the 
Company since August 1995.  She served as Chief Financial Officer 
at The ImagiNation Network, an entertainment software company from 
April 1994 to August 1995 and as Chief Financial Officer of Verity, 
Inc., an information retrieval software company, from April 1989 to 
March 1994.  She previously served as Chief Financial Officer for 
Automation Technology Products and Software Publishing Corporation, 
as well as in various positions at Hewlett-Packard Corporation.

Michael M. Loo has served as Vice President, Finance of the 
Company since May 1995.  He initially served as its Director of 
Finance and Administration from October 1993 to May 1995.  
Previously, he served in various financial and accounting 
positions, most recently as Controller, Worldwide Field Operations, 
at Sybase Corporation, a client/server software company, from 
January 1990 to October 1993.  Prior to that he held a number of 
positions with Oracle Corporation and ROLM Corporation.

David R. Schellhase has served as Vice President and General 
Counsel of the Company since August 1997.  He was General Counsel 
of Premenos Technology  Corp. from November 1995 to August 1997.  
From July 1993 to November 1995 he was Corporate Counsel at Oracle 
Corporation.  From September 1990 to June 1993 he was an associate 
with the law firm of Brobeck, Phleger & Harrison.  He is an adjunct 
faculty member at the Golden Gate University School of Law.

David Jodoin has served as Executive Vice President, Corporate 
Development of the Company since January 1998.  From August 1997 to 
January 1998, he was Executive Vice President, Field Services of 
the Company.  He was the founder of Innovative Computer Concepts, 
Inc. and served as its President and Chief Executive Officer from 
July 1994 until its acquisition by the Company in September 1997.  
Previously, he served in several capacities for CODA Incorporated 
from January 1990 until July 1994, most recently as Director of 
Development for CODA Group Limited.

Mary Egan Lorigan has served as Vice President, North America 
Sales of the Company since November 1997.  She was Vice President, 
North America Vertical and Channels with the Company from January 
1997 to November 1997 and was Vice President, Western Region from 
November 1993 through December 1997.  Previously, she served in 
sales and sales management positions with Informix Software, Inc., 
most recently as Director, Northeastern Region from January 1990 to 
May 1993 and Director of Channel Marketing and Strategic VAR Sales 
from May 1993 to October 1993.

Marie Alexander has served as Vice President of Client Services 
of the Company since August 1994.  She was Senior Director of 
Client Services at Harbinger Corporation from January 1992 to 
August 1994.

Item 2. Properties

The Company's principal administrative, engineering, 
manufacturing, marketing and sales facilities total approximately 
72,000 square feet and are located in two buildings in Santa Clara, 
California under leases which expire in May 2001 and December 2003.  
In addition, the Company leases offices in approximately 25 cities 
in Asia, Australia, Europe, North America and South America.

Item 3. Legal Proceedings

        None.

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

        None

PART II

Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters

The Company's stock has been traded on the NASDAQ National 
Market System since the Company's initial public offering on 
August 14, 1995, under the NASDAQ symbol VNTV.  The following table 
sets forth, for the periods indicated, the high and low closing 
sales prices for the Company's common stock as reported by NASDAQ:


                                              HIGH      LOW
                                            --------  --------

 Year Ended December 31, 1996
--------------------------------------
 First Quarter                              $12.250    $9.500
 Second Quarter                             $19.750   $11.000
 Third Quarter                              $32.380   $12.750
 Fourth Quarter                             $42.250   $24.750

 Year Ended December 31, 1997
--------------------------------------
 First Quarter                              $34.250   $19.000
 Second Quarter                             $30.875   $14.500
 Third Quarter                              $38.000   $21.750
 Fourth Quarter                             $30.625   $21.375

All sales prices have been adjusted for a 2-for-1 stock dividend 
paid in the form of a 100% stock dividend in October 1996.  As of 
December 31, 1997, there were approximately 365 holders of record 
of the Company's common stock.

The Company has never paid cash dividends on its common stock.  
The Company currently intends to retain earnings, if any, for use 
in its business and does not anticipate paying any cash dividends 
in the foreseeable future.
<PAGE>

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

                            THE VANTIVE CORPORATION
                      SELECTED CONSOLIDATED FINANCIAL DATA
                     (In thousands, except per share data)
<TABLE>
<CAPTION>

                                                          For the Years Ended December 31,
                                            -----------------------------------------------------
                                              1993       1994       1995       1996       1997
                                            ---------  ---------  ---------  ---------  ---------
<S>                                         <C>        <C>        <C>        <C>        <C>
 CONSOLIDATED STATEMENT OF OPERATIONS DATA:
   Revenues:
     License  . . . . . . . . . . . . . .     $1,900     $7,141    $16,631    $41,513    $76,471
     Service  . . . . . . . . . . . . . .        613      3,073      8,404     22,761     40,875
                                            ---------  ---------  ---------  ---------  ---------
           Total revenues  . . . . . .         2,513     10,214     25,035     64,274    117,346
   Cost of Revenues:
     License  . . . . . . . . . . . . . .         50        110        163        392        736
     Service  . . . . . . . . . . . . . .      1,227      2,383      5,968     12,263     22,748
                                            ---------  ---------  ---------  ---------  ---------
           Total cost of revenues . . . .      1,277      2,493      6,131     12,655     23,484
                                            ---------  ---------  ---------  ---------  ---------
   Gross margin . . . . . . . . . . . . .      1,236      7,721     18,904     51,619     93,862
   Operating Expenses:
     Sales and marketing  . . . . . . . .      2,142      5,068     11,582     24,676     45,811
     Research and development   . . . . .      1,726      2,072      3,319      7,261     17,508
     General and administrative . . . . .        908      1,099      2,167      5,389      9,377
     Acquired in-process research
       and development  . . . . . . . . .         --         --         --         --     21,121
                                            ---------  ---------  ---------  ---------  ---------
           Total operating expenses . . .      4,776      8,239     17,068     37,326     93,817
                                            ---------  ---------  ---------  ---------  ---------
   Income (loss) from operations  . . . .     (3,540)      (518)     1,836     14,293         45

   Other income (expense), net  . . . . .        (92)       (30)       439      1,286      1,305
                                            ---------  ---------  ---------  ---------  ---------
   Income (loss) before provision for
     income taxes . . . . . . . . . . . .     (3,632)      (548)     2,275     15,579      1,350
   Provision for income taxes . . . . . .         --         --        232      4,674      8,308
                                            ---------  ---------  ---------  ---------  ---------
   Net income (loss)  . . . . . . . . . .    ($3,632)     ($548)    $2,043    $10,905    ($6,958)
                                            =========  =========  =========  =========  =========
   Net income (loss) per basic share* . .     ($1.14)    ($0.14)     $0.10      $0.45     ($0.28)
                                            =========  =========  =========  =========  =========
   Net income (loss) per diluted share* .     ($1.14)    ($0.14)     $0.09      $0.42     ($0.28)
                                            =========  =========  =========  =========  =========
   Basic - Shares used in per share
      computation*. . . . . . . . . . . .      3,175      4,038     21,034     24,008     24,570
                                            =========  =========  =========  =========  =========
   Diluted- Shares used in per share
      computation*. . . . . . . . . . . .      3,175      4,038     23,012     25,847     24,570
                                            =========  =========  =========  =========  =========
</TABLE>

<TABLE>
<CAPTION>
                                                                December 31,
                                            -----------------------------------------------------
                                              1993       1994       1995       1996       1997
                                            ---------  ---------  ---------  ---------  ---------
<S>                                         <C>        <C>        <C>        <C>        <C>
 CONSOLIDATED BALANCE SHEET DATA:
   Working capital  . . . . . . . . . . .     $1,553     $3,438    $24,463    $32,959   $108,929
   Total assets . . . . . . . . . . . . .      3,365      7,457     34,587     58,364    162,739
   Total liabilities  . . . . . . . . . .      1,325      3,321      7,930     18,933    107,007
   Mandatorily redeemable convertible
     preferred stock. . . . . . . . . . .      8,244     10,801         --         --         --
   Stockholders' equity 
                ( deficit). . . . . . . .    ($6,204)   ($6,665)   $26,657    $39,431    $55,732
</TABLE>

*Net income (loss) per share in 1993, 1994 and 1995 have been restated in 
accordance with the requirements of SFAS No. 128, "Earnings Per Share" and SEC
Staff Accounting Bulletin No. 98.

<PAGE>

                            THE VANTIVE CORPORATION
                            QUARTERLY FINANCIAL DATA
                     (In thousands, except per share data)
<TABLE>
<CAPTION>
                                                              Quarter Ended
                                -------------------------------------------------------------------------------
                                Mar. 31,  June 30,  Sept. 30, Dec. 31,  Mar. 31,  June 30,  Sept. 30, Dec. 31,
                                  1996      1996      1996      1996      1997      1997      1997      1997
                                --------- --------- --------- --------- --------- --------- --------- ---------
<S>                             <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
Revenues:
    License  . . . . . . . . . .  $7,088    $9,914   $11,102   $13,409   $15,026   $16,893   $19,889   $24,663
    Service  . . . . . . . . . .   3,725     5,287     6,147     7,602     7,497     9,117    11,199    13,062
                                --------- --------- --------- --------- --------- --------- --------- ---------
       Total revenues  . . . . .  10,813    15,201    17,249    21,011    22,523    26,010    31,088    37,725

Cost of revenues:
    License  . . . . . . . . . .      56        97       113       126       120       182       210       224
    Service  . . . . . . . . . .   2,322     2,769     3,316     3,856     4,044     4,975     6,444     7,285
                                --------- --------- --------- --------- --------- --------- --------- ---------
       Total cost of revenues  .   2,378     2,866     3,429     3,982     4,164     5,157     6,654     7,509
                                --------- --------- --------- --------- --------- --------- --------- ---------
Gross margin  . . . . . . . . .    8,435    12,335    13,820    17,029    18,359    20,853    24,434    30,216

Operating expenses:
    Sales and marketing  . . . .   4,826     5,100     6,462     8,288     9,662    10,674    11,811    13,664
    Research and development . .   1,102     1,403     1,694     3,062     3,299     3,610     4,689     5,910
    General and administrative .   1,079     1,136     1,511     1,663     1,719     2,037     2,413     3,208
    Acquired in-process research
      and development  . . . . .      --        --        --        --        --        --    21,121        --
                                --------- --------- --------- --------- --------- --------- --------- ---------
       Total operating expenses.   7,007     7,639     9,667    13,013    14,680    16,321    40,034    22,782
                                --------- --------- --------- --------- --------- --------- --------- ---------
Income (loss) from operations  .   1,428     4,696     4,153     4,016     3,679     4,532   (15,600)    7,434
Other income . . . . . . . . . .     272       287       370       357       367       390       376       172
                                --------- --------- --------- --------- --------- --------- --------- ---------
Income (loss) before provision
  for income taxes . . . . . . .   1,700     4,983     4,523     4,373     4,046     4,922   (15,224)    7,606
Provision for income taxes . . .     340     1,665     1,357     1,312      1497     1,817     2,178     2,816
                                --------- --------- --------- --------- --------- --------- --------- ---------
Net income (loss). . . . . . . .  $1,360    $3,318    $3,166    $3,061    $2,549    $3,105  ($17,402)   $4,790
                                ========= ========= ========= ========= ========= ========= ========= =========
Net income (loss) per  
  basic share. . . .  . . . . .    $0.06     $0.14     $0.13     $0.13     $0.11     $0.13    ($0.71)    $0.19
                                ========= ========= ========= ========= ========= ========= ========= =========
Net income (loss) per  
  diluted share. . . . . . . . .   $0.05     $0.13     $0.12     $0.12     $0.10     $0.12    ($0.71)    $0.19
                                ========= ========= ========= ========= ========= ========= ========= =========
</TABLE>

<TABLE>
<CAPTION>
                                                             As a Percentage of Total Revenues
                                -------------------------------------------------------------------------------
                                  Mar. 31,  June 30,  Sept. 30, Dec. 31,  Mar. 31,  June 30,  Sept. 30, Dec. 31,
                                    1996      1996      1996      1996      1997      1997      1997      1997
                                --------- --------- --------- --------- --------- --------- --------- ---------
<S>                             <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
Revenues:
    License  . . . . . . . . . .    65.6%     65.2%     64.4%     63.8%     66.7%     64.9%     64.0%     65.4%
    Service  . . . . . . . . . .    34.4%     34.8%     35.6%     36.2%     33.3%     35.1%     36.0%     34.6%
                                --------- --------- --------- --------- --------- --------- --------- ---------
       Total revenues  . . . . .   100.0%    100.0%    100.0%    100.0%    100.0%    100.0%    100.0%    100.0%

Cost of revenues:
    License  . . . . . . . . . .     0.5%      0.7%      0.7%      0.6%      0.5%      0.7%      0.7%      0.6%
    Service  . . . . . . . . . .    21.5%     18.2%     19.2%     18.4%     18.0%     19.1%     20.7%     19.3%
                                --------- --------- --------- --------- --------- --------- --------- ---------
       Total cost of revenues  .    22.0%     18.9%     19.9%     19.0%     18.5%     19.8%     21.4%     19.9%
                                --------- --------- --------- --------- --------- --------- --------- ---------
Gross margin  . . . . . . . . .     78.0%     81.1%     80.1%     81.0%     81.5%     80.2%     78.6%     80.1%

Operating expenses:
    Sales and marketing  . . . .    44.6%     33.6%     37.5%     39.4%     42.9%     41.0%     38.0%     36.2%
    Research and development . .    10.2%      9.2%      9.8%     14.6%     14.7%     13.9%     15.1%     15.7%
    General and administrative .    10.0%      7.5%      8.8%      7.9%      7.6%      7.8%      7.8%      8.5%
    Acquired in-process research
      and development  . . . . .      --        --        --        --        --        --      67.9%       --
                                --------- --------- --------- --------- --------- --------- --------- ---------
       Total operating expenses.    64.8%     50.3%     56.1%     61.9%     65.2%     62.7%    128.8%     60.4%
                                --------- --------- --------- --------- --------- --------- --------- ---------
Income (loss) from operations  .    13.2%     30.8%     24.0%     19.1%     16.3%     17.5%    -50.2%     19.7%
Other income . . . . . . . . . .     2.5%      1.9%      2.1%      1.7%      1.6%      1.4%      1.2%      0.5%
                                --------- --------- --------- --------- --------- --------- --------- ---------
Income (loss) before provision
  for income taxes . . . . . . .    15.7%     32.7%     26.1%     20.8%     17.9%     18.9%    -49.0%     20.2%
Provision for income taxes . . .     3.1%     10.9%      7.8%      6.2%      6.6%      7.0%      7.0%      7.5%
                                --------- --------- --------- --------- --------- --------- --------- ---------
Net income (loss). . . . . . . .    12.6%     21.8%     18.3%     14.6%     11.3%     11.9%    -56.0%     12.7%
                                ========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
<PAGE>

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

Overview

The Company was founded in October 1990 to develop software to 
enable businesses to improve their customer service.  The Company 
was engaged principally in research and development from inception 
through December 31, 1992.  The Company's suite of products 
addresses the front-office automation market and is called the 
Vantive Enterprise.  The Vantive Enterprise consists of the 
following applications: Vantive Sales, Vantive Support, Vantive 
FieldService, Vantive Inventory, Vantive Procurement, Vantive 
HelpDesk and Vantive Quality.  The release of Vantive Enterprise 7 
in the third quarter of 1997 contains significant enhancements to 
all applications and a new development environment, Vantive Object 
Studio, which allows for rapid customization, deployment and 
administration of the Vantive Enterprise.  License fees for the 
Company's software products consist of (i) a per server fee based 
on the specific Vantive Enterprise application(s) licensed and 
(ii) a fee based on the maximum number of concurrent, named or 
mobile users allowed to access those applications.  Most of the 
Company's revenues to date have resulted from non-recurring 
license fees based on sales of concurrent user licenses.  The 
remaining revenues are primarily attributable to service revenues, 
which include customer support, consulting and training revenue.  
Of these service revenues, only customer support revenues are 
expected to be recurring.  Customer support revenues accounted for 
approximately 9.3%, 12.1% and 13.5% of total revenues, in 1995, 
1996 and 1997, respectively.  Because concurrent user fees are not 
application-specific, the Company cannot precisely determine the 
breakdown of revenues attributable to specific applications for 
customers that have purchased more than one application.  However, 
the Company believes that most of its revenues have been derived 
from fees associated with Vantive Support, Vantive HelpDesk and, 
to a lesser degree, Vantive Sales.  In any period, a significant 
portion of the Company's revenues may be derived from large sales 
to a limited number of customers.  However, no customer accounted 
for over 10% of total revenues during 1995, 1996 or 1997.  As 
significant sales to a particular customer are typically 
non-recurring, the Company does not believe its future results are 
dependent on recurring revenues from any particular customer.

The Company's revenues are derived from software license fees 
and fees for its services.  License revenues consist of license 
fees for the Company's products as well as fees from sublicensing 
third party software products.  The Company generally recognizes 
license fees upon shipment of software products if collection is 
probable, the license agreement requires payment within one year, 
the fee is fixed or determinable and vendor specific evidence 
exists to allocate the total fee to all elements of the 
arrangement.  If significant post-delivery obligations exist or if 
a product is subject to customer acceptance, revenues are deferred 
until no significant obligations remain or acceptance has 
occurred.  Revenues from services have to date consisted primarily 
of consulting revenues, customer support revenues and, to a lesser 
extent, training revenues.  Consulting and training revenues 
generally are recognized as services are performed.  Customer 
support revenues are recognized ratably over the term of the 
support period, which is typically one year.  If customer support 
services are included free or at a discount in a license 
agreement, such amounts are allocated out of the license fee at 
their fair market value based on the value established by 
independent sale of such customer support services to customers.  
If a transaction includes both license and service elements, 
license fee revenue is recognized upon shipment of the software, 
provided services do not include significant customization or 
modification of the base product and the payment terms for 
licenses are not subject to acceptance criteria.  In cases where 
license fee payments are contingent upon the acceptance of 
services, revenues from both the license and the service elements 
are deferred until the acceptance criteria are met.  See Note 2 of 
Notes to Consolidated Financial Statements.  

International revenues, or revenues derived from sales to  customers in
foreign countries, primarily in Europe, accounted for  approximately 9.8%,
9.3% and 16.0% of the Company's revenue in  1995, 1996 and 1997, respectively.
 The Company believes that its  continued growth and profitability will
require further expansion  of its international operations.  To successfully
expand  international sales, the Company must establish additional foreign 
operations, hire additional personnel and recruit additional  international
resellers.  To the extent that the Company is unable  to do so in a timely
manner, the Company's growth in international  sales, if any, will be limited
and the Company's business, results  of operations and financial condition
could be materially adversely  affected.   There are certain risks inherent in
doing business on  an international level, such as unexpected changes in
regulatory  requirements, export restrictions, tariffs and other trade 
barriers, difficulties in staffing and managing foreign operations,  longer
payment cycles, problems in collecting accounts receivable,  political
instability, changes in foreign economic conditions,  fluctuations in currency
exchange rates, seasonal reductions in  business activity during the summer
months in Europe and certain  other parts of the world and potentially adverse
tax consequences,  any of which could adversely impact the success of the
Company's  international operations.  The Company's foreign subsidiaries 
operate primarily in local currencies, and their results are  translated into
US dollars.  If the value of the US dollar  increases relative to foreign
currencies, the Company's operating  results could be materially adversely
affected.  In particular,  revenue from sales in the Pacific Rim could be
adversely affected  by declines in the value of such currencies against the
dollar.  In  addition, the overall weakness of these economies could adversely
 affect revenue from the Pacific Rim.  Although the Company has not 
experienced these effects in a meaningful way to date, there can be  no
assurance that it will not experience them in the future.  There  can be no
assurance that one or more of such factors will not have  a material adverse
effect on the Company's future international  operations and, consequently, on
its business, operating results  and financial condition.  

This Management's Discussion and Analysis of Financial  Condition and Results
of Operations includes a number of forward- looking statements which reflect
the Company's current views with  respect to future events and financial
performance.  These  forward-looking statements are subject to certain risks
and  uncertainties, including those discussed below that could cause  actual
results to differ materially from historical results or  those anticipated. 
In this report, the words "anticipate,"  "believes," "expects," "future,"
"intends," and similar  expressions identify forward-looking statements. 
Readers are  cautioned not to place undue reliance on these forward-looking 
statements, which speak only as of the date hereof.

<PAGE>

RESULTS OF OPERATIONS

         The following table sets forth the percentages that income statement
items are to total revenues for the years ended December 31, 1995, 1996 and
1997:


<TABLE>
<CAPTION>
                                             For the Years Ended December 31,
                                            --------------------------------
                                               1995       1996         1997
                                            ---------- ---------- ----------
<S>                                         <C>        <C>        <C>
REVENUES:
  License ................................       66.4%      64.6%      65.2%
  Service ................................       33.6%      35.4%      34.8%
                                            ---------- ---------- ----------
           Total revenues.................      100.0%     100.0%     100.0%

COST OF REVENUES:
  License ................................        0.7%       0.6%       0.6%
  Service ................................       23.8%      19.1%      19.4%
                                            ---------- ---------- ----------
           Total cost of revenues.........       24.5%      19.7%      20.0%
                                            ---------- ---------- ----------
GROSS MARGIN..............................       75.5%      80.3%      80.0%

OPERATING EXPENSES:
  Sales and marketing.....................       46.3%      38.4%      39.0%
  Research and development................       13.2%      11.3%      14.9%
  General and administrative .............        8.7%       8.4%       8.0%
  Acquired in-process research
    and development.......................          --         --      18.0%
                                            ---------- ---------- ----------
           Total operating expenses.......       68.2%      58.1%      79.9%
                                            ---------- ---------- ----------
Operating Income.........................         7.3%      22.2%       0.1%
                                            ---------- ---------- ----------
OTHER INCOME:                                     1.8%       2.0%       1.1%
                                            ---------- ---------- ----------
INCOME BEFORE PROVISION
  FOR INCOME TAXES........................        9.1%      24.2%       1.2%
PROVISION FOR INCOME TAXES................        0.9%       7.3%       7.1%
                                            ---------- ---------- ----------
NET INCOME (LOSS).........................        8.2%      16.9%      -5.9%
                                            ========== ========== ==========
</TABLE>

Revenues

License.  The Company increased its license revenues by 149.6% 
from $16.6 million in 1995 to $41.5 million in 1996 and by 84.2% to 
$76.5 million in 1997.  These increases were due to the market's 
growing acceptance of the Company's products and the release of 
Vantive Enterprise 7 in the third quarter of 1997.  The Company 
does not believe that the historical growth rates of license 
revenues will be sustainable or are indicative of future results.

Service.  Service revenues are primarily comprised of fees from 
consulting, customer support and, to a lesser extent, training 
services.  Service revenues increased by 170.8% from $8.4 million 
in 1995 to $22.8 million in 1996 and by 79.4% to $40.9 million in 
1997.  The increase in service revenues was primarily due to the 
increase in consulting, customer support and, to a lesser extent, 
training services associated with increased sales of the Company's 
applications.  As the Company implements its strategy of 
encouraging third party organizations such as systems integrators 
to become proficient in implementing the Company's products, 
consulting revenues as a percentage of total revenues may decrease.  

Cost of Revenues

License.  Cost of license revenues includes the cost of product 
media, product duplication and manuals.  Cost of license revenues 
increased from $163,000, or 1.0% of related license revenues, in 
1995, to $392,000, or 0.9% of related license revenues, in 1996 and 
to $736,000, or 1.0% of related license revenues, in 1997.  The 
increase in absolute dollars in cost of license revenues was 
primarily due to the increase in volume shipments of the Company's 
software applications and the cost of sublicensing third-party 
software.  

Service.  Cost of service revenues is primarily comprised of 
employee-related costs and fees for third-party consultants 
incurred in providing consulting, customer support and training 
services.  Cost of service revenues increased from $6.0 million, or 
71.0% of related service revenues, in 1995, to $12.3 million, or 
53.9% of related service revenues, in 1996 and to $22.7 million, or 
55.7% of related service revenues, in 1997.  These increases in 
absolute dollars were due primarily to increases in consulting, 
support and training personnel and third-party service providers 
during these periods.  The increase in cost of service revenues as 
a percentage of the related service revenues from 1996 to 1997 was 
primarily due to the variation in the resources used during the 
period.  The decrease in cost of service revenues as a percentage 
of the related service revenues from 1995 to 1996 was primarily due 
to economies of scale realized as a result of a higher level of 
service activity and due to customer support revenues constituting 
a higher proportion of total service revenues.  The cost of 
services as a percentage of service revenues may vary between 
periods due to the mix of services provided by the Company and the 
resources used to provide these services.

Operating Expenses

Sales and marketing.  Sales and marketing expenses increased 
from $11.6 million, or 46.3% of revenues, in 1995 to $24.7 million, 
or 38.4% of revenues, in 1996 and to $45.8 million, or 39.0% of 
revenues, in 1997.  These increases in absolute dollars were 
primarily related to the expansion of the Company's sales and 
marketing resources, increased commissions expenses as a result of 
higher sales levels and increased marketing activities, including 
trade show, direct mail and other promotional expenses.  The 
Company plans to continue to invest heavily in expanding its sales 
and marketing activities.  Accordingly, sales and marketing 
expenses are anticipated to increase both in absolute dollars and 
as a percentage of revenues over the coming year.

Research and development.  Research and development expenses 
increased from $3.3 million, or 13.2% of revenues, in 1995 to 
$7.3 million, or 11.3% of revenues, in 1996 and to $17.5 million, 
or 14.9% of revenues in 1997.  Research and development expenses 
increased in absolute dollars between the years primarily as a 
result of an increase in personnel and outside contractors to 
support the Company's product development activities.  In addition, 
research and development expenses increased as a percentage of 
revenues in 1997 compared to 1996 primarily due to product releases 
which includes Vantive Enterprise 7, VanWeb, Vantive On-The-Go, 
Vantive Inventory, and Vantive Procurement.  Over the coming 
years, the Company plans to continue to invest heavily in research 
and development.  As a result, research and development expenses 
are anticipated to increase in absolute dollars over the coming 
year.

Research and development expenses are generally charged to 
operations as incurred.  In accordance with Statement of Financial 
Accounting Standards No.  86, internally-generated costs which were 
eligible for capitalization for these periods were insignificant 
and the Company charged all software development costs to research 
and development expense.

General and administrative.  General and administrative expenses 
increased from $2.2 million, or 8.7% of revenues, in 1995 to 
$5.4 million, or 8.4% of revenues, in 1996 and to $9.4 million, or 
8.0% of revenues in 1997.  General and administrative expenses 
increased in absolute dollars during these periods primarily due to 
the addition of staff and information system investments to support 
the growth of the Company's business during these periods.  The 
Company expects general and administrative expenses will increase 
in absolute dollars over the coming year.

Acquired in-process research and development.  On August 26, 
1997, the Company completed the acquisition of Innovative Computer 
Concepts, Inc.  ("ICC"), a leading developer of software that 
improves spare parts procurement and management for field service 
applications (the "Merger").  The Company paid $125,000 in cash 
and issued 655,571 shares of its common stock in exchange for all 
outstanding shares of ICC.  The Company also assumed all 
outstanding ICC options, which were converted to options to 
purchase approximately 32,381 shares of the Company's common stock, 
resulting in a total purchase price of  $21 million (including 
direct costs of the acquisition).  The Merger was recorded under 
the purchase method of accounting and therefore the results of 
operations of ICC and the fair value of the acquired assets and 
liabilities were included in the Company's financial statements 
beginning on the acquisition date.  Upon consummation of the 
Merger, ICC became a wholly owned subsidiary of the Company.  In 
connection with the acquisition, the Company received an appraisal 
of the intangible assets, which indicated that approximately $21.1 
million represented in-process research and development.   The 
acquired in-process research and development was expensed in the 
quarter ended September 30, 1997.  In addition, the Company has 
recorded goodwill of approximately $680,000 that will be amortized 
on a straight-line basis over five years.   

Provision for income taxes.  The Company's provision for 
federal, state and foreign income taxes for fiscal 1997 was $8.3 
million.  The effective tax rate for fiscal 1997 was negatively 
affected due to the non-deductibility of the charges related to the 
acquired in-process research and development that resulted from the 
Merger.  Excluding the effect of these charges, the effective tax 
rate for fiscal 1997 would have been 37%, compared to an effective 
tax rate of 30% for fiscal 1996.  The primary reason for the 
increase in the effective tax rate is that the Company utilized 
its remaining domestic net operating loss carryforwards during 
1996 and used $430,000 of operating loss carryforwards to benefit 
1997.  The remaining net operating loss carryforwards available to 
benefit future years are approximately $451,000 at December 31, 
1997.   See Note 11 of the Notes to Consolidated Financial 
Statements.  

Net income (loss) and earnings (loss) per share.  Net income 
(loss) was $2.0 million, $10.9 million and $(7.0) million for the 
years ended December 31, 1995, 1996 and 1997, respectively.  Net 
income (loss) per basic share was $0.10, $0.45 and $(0.28) for the 
years ended December 31, 1995, 1996 and 1997, respectively.  Net 
income (loss) per diluted share was $0.09, $0.42 and $(0.28) for 
the years ended December 31, 1995, 1996 and 1997, respectively.  
Excluding the financial statement effects of the Merger, net 
income for the year ended December 31, 1997, would have been $14.2 
million, or $0.55 per diluted share.

Financial Condition

Total assets as of December 31, 1997 increased $104.4 million 
from December 31, 1996.  The increase was primarily due to 
increases in cash, cash equivalents and short-term investments, 
accounts receivable, prepaid expenses and other current assets and 
property and equipment.  Cash, cash equivalents and short-term 
investments increased by $68.5 million, primarily due to funds 
consisting of the proceeds from the issuance of convertible debt.  
On August 21, 1997, the Company sold an aggregate of $69.0 million 
in principal of convertible subordinated notes due 2002 to certain 
investors in the United States and outside the United States and 
incurred approximately $2.4 million of offering expenses in 
connection with this issuance (the "Convertible Debt").  These 
notes have a 4.75% coupon over a five-year term and are convertible 
into the Company's common stock at the investor's option, if and 
when the share price exceeds $41.93 per share.  Net accounts 
receivable increased $19.5 million primarily due to increased 
revenues from sales of the Company's products and services.  Net 
property and equipment increased $5.7 million primarily due to 
equipment purchases associated with supporting the growth of the 
Company's business during this period.

Current liabilities as of December 31, 1997 increased 
$19.5 million from December 31, 1996.  The increase was due to 
increases in accrued liabilities and deferred revenues of $16.1 
million and $3.0 million, respectively.  These increases were 
primarily due to increased expense levels and accruals associated 
with a higher transaction volume and deferrals of revenues related 
to customer support.

Liquidity and Capital Resources

Operating activities provided cash of $5.6 million in 1997.  The 
primary source of these funds was income from operations after the 
write-off of acquired in-process research and development costs, 
increase in accrued liabilities and deferred revenues, partially 
offset by increases in accounts receivables and prepaid expenses 
and other current assets.  Operating activities provided cash of 
$10.3 million in 1996.  The primary source of these funds was net 
income, increases in accounts payable and accrued liabilities and 
deferred revenues, partially offset by increases in accounts 
receivable and prepaid expenses and other current assets.

Investing activities used cash of $26.2 million in 1997, 
primarily for the purchase of short-term, interest-bearing, 
investment-grade securities and for the purchase of capital 
equipment.  Investing activities used cash of $3.2 million in 1996, 
primarily for the purchase of capital equipment and, to a lesser 
extent, for the purchase of short-term, interest-bearing, 
investment-grade securities.  The Company does not currently have 
any material commitments for capital equipment acquisitions.

Financing activities provided cash of $72.2 million in 1997.  
The primary source of these funds was proceeds from the issuance of 
the Convertible Debt.  The Company intends to use the net proceeds 
of $66.6 million from the Convertible Debt offering for working 
capital and other general corporate purposes.  Financing 
activities provided cash of $1.3 million in 1996.  The primary 
source of these funds was proceeds from issuance of Common Stock 
pursuant to the exercise of outstanding stock options, partially 
offset by payments on capital lease obligations.  

At December 31, 1997, the Company's principal sources of 
liquidity were its cash, cash equivalents and short-term 
investments of $101.4 million.  The Company believes that existing 
cash and short-term investment balances and potential cash flow 
from operations will be sufficient to meet its cash requirements 
for the next twelve months.  While operating activities may provide 
cash in certain periods to the extent the Company experiences 
growth in the future, operating and investing activities may use 
cash and consequently, such growth may require the Company to 
obtain additional sources of financing.

Business Risks

This report includes a number of forward-looking statements, 
which reflect the Company's current views on future events and 
financial performance.  These forward-looking statements are 
subject to certain risks and uncertainties, including those 
discussed below which could cause actual results to differ 
materially from historical results or those anticipated.  Some of 
the forward-looking statements are generally applicable to emerging 
growth companies or to the software industry, others are specific 
to the front-office automation market and others are specific to 
the Company.  In this report, the words "anticipates," 
"believes," "expects," "intends," "future" and similar 
expressions identify forward-looking statements.  Readers are 
cautioned not to place undue reliance on these forward-looking 
statements, which speak only as of the date hereof.

Future Operating Results Uncertain.  The Company has experienced 
significant growth in revenues in recent periods.  The Company does 
not believe that the historical growth rates of revenues will be 
sustainable or are indicative of future results.  In addition, the 
Company's limited operating history makes the prediction of future 
operating results difficult or impossible.  The Company's future 
operating results will depend on many things, including demand for 
the Company's products, the level of product and price competition, 
the ability of the Company to develop and market new products and 
to control costs, the ability of the Company to expand its direct 
sales force and indirect distribution channels and the ability to 
attract and retain key personnel.  The Company is currently 
investing, and intends to continue to invest, significant resources 
to develop its sales strategy, which could adversely affect the 
Company's operating margins.   Competition for good salespeople and 
sales managers is intense and there can be no assurance that the 
Company can retain its existing sales personnel or that it can 
attract, assimilate and retain additional highly qualified sales 
personnel in the future.  The Company's strategy also depends, in 
part, on relationships with third parties.  There also can be no 
assurance that the Company will attract and retain appropriate 
high-end integrators, resellers and other third party distributors 
to market the Company's products effectively.  Further, the Company 
believes, based on interactions with its customers and potential 
customers, that the purchase of its products is relatively 
discretionary and generally involves a significant commitment of 
capital.  As a result, in the event of any downturn in any 
potential customer's business or the economy in general, purchases 
of the Company's products may be deferred or canceled, which could 
have a material adverse effect on the Company's business, results 
of operations and financial condition.  The Company was not 
profitable prior to 1995 and there can be no assurance that the 
Company will remain profitable on a quarterly or annual basis.  See 
"Business - Sales and Marketing." 

Fluctuations in Quarterly Operating Results.  The Company's 
quarterly operating results have in the past varied and will 
probably in the future vary significantly depending on factors such 
as the size, timing and recognition of revenue from significant 
orders, increased competition, the timing of new product releases 
by the Company and its competitors, market acceptance of the 
Company's products, changes in the Company's and its competitors' 
pricing policies, the mix of license and service revenue, budgeting 
cycles of its customers, seasonality, the mix of direct and 
indirect sales, changes in operating expenses, changes in Company 
strategy, personnel changes, foreign currency exchange rates and 
general economic factors.  

A significant portion of the Company's revenues in any quarter 
is typically derived from non-recurring sales to a limited number 
of customers.  Accordingly, revenues in any one quarter are not 
indicative of revenues in any future period.  In addition, like 
many software applications businesses, the Company has generally 
recognized a substantial portion of its revenues in the last month 
of each quarter, with these revenues concentrated in the last weeks 
of the quarter.  Any significant deferral of purchases of the 
Company's products could have a material adverse effect on the 
Company's business, results of operations and financial condition 
in any particular quarter and to the extent that significant sales 
occur earlier than expected, operating results for subsequent 
quarters may be adversely affected.  Product revenues are also 
difficult to forecast because the market for front-office 
automation software products is rapidly evolving.  The Company's 
sales cycle is typically six to nine months but varies 
substantially from customer to customer.  The Company expects that 
sales made through indirect channels, which are harder to predict 
and usually have lower margins than direct sales, will increase as 
a percentage of total revenues.  

The Company operates with little order backlog because its 
products are typically shipped shortly after orders are received.  
As a result of these factors, quarterly revenues for any future 
quarter are not predictable with any significant degree of 
certainty.  The Company's expense levels are based, in part, on its 
expectations as to future revenues.  Net income may be 
disproportionately affected by a reduction in revenues, because 
most of the Company's expenses do not vary with revenues.  The 
Company may also choose to reduce prices or increase spending in 
response to competition or to pursue new market opportunities.  In 
particular, if new competitors, technological advances by existing 
competitors, or other competitive factors require the Company to 
invest significantly greater resources in research and development 
efforts, the Company's operating margins in the future may be 
adversely affected.  

The foregoing statements regarding the Company's future revenues 
and net income are forward-looking statements and actual results 
may vary substantially depending upon a variety of factors 
described in this paragraph and elsewhere in this report.   

Because of these factors, the Company believes that period-to-
period comparisons of its results of operations are not necessarily 
meaningful and that such comparisons should not be relied upon as 
indications of future performance.  Due to all of the foregoing 
factors, it is likely that in some future quarter the Company's 
operating results will be below the expectations of public market 
analysts and investors.  If this happens, the price of the 
Company's Common Stock will likely be materially adversely 
affected.

Rapid Technological Change and Product Development Risks.  The 
front-office automation software market is subject to rapid 
technological change, changing customer needs, frequent new product 
introductions and evolving industry standards that may render 
existing products and services less marketable or obsolete.  As a 
result, the Company's position in its existing markets or other 
markets that it may enter could be eroded rapidly by product 
advances.  The life cycles of the Company's products are difficult 
to estimate.  The Company's growth and future financial performance 
will depend in part on its ability to enhance existing 
applications, develop and introduce new applications that keep pace 
with technological advances, meet changing customer requirements, 
respond to competitive products and achieve market acceptance.  
These are increasingly complex and costly undertakings.  For 
example, the Company's customers have adopted a wide variety of 
hardware, software, database, Internet-based and networking 
platforms and as a result, to gain broad market acceptance, the 
Company must continue to support and maintain its products on a 
variety of such platforms.  The Company's future success will 
depend on its ability to address the increasingly sophisticated 
needs of its customers by supporting existing and emerging 
hardware, software, database, Internet-based and networking 
platforms and by developing and introducing enhancements to its 
products and new products on a timely basis that keep pace with 
technological developments, evolving industry standards and 
changing customer requirements.  The Company may not be able to 
successfully change other aspects of its business, such as its 
distribution channels or cost structure, if technological changes 
in its market require such change.  

The Company's product development efforts require substantial 
investments by the Company.  There can be no assurance that the 
Company will have sufficient resources to make the necessary 
investments.  The Company has in the past experienced development 
delays and there can be no assurance that the Company will not 
experience such delays in the future.  There can be no assurance 
that the Company will not experience difficulties that could delay 
or prevent the successful development, introduction or marketing of 
new or enhanced products in the future.  In addition, there can be 
no assurance that such products will meet the requirements of the 
marketplace and achieve market acceptance.  If the Company is 
unable, for technological or any other reasons, to develop and 
introduce new and enhanced products in a timely manner, the 
Company's business, results of operations and financial condition 
could be materially adversely affected.

Software products as complex as those offered by the Company may 
contain errors that may be detected at any point in the products' 
life cycles.  The Company has in the past discovered software 
errors in certain of its products and has delayed shipment of 
products during the period required to correct these errors.  There 
can be no assurance that, despite testing by the Company and by 
current and potential customers, errors will not be found, 
resulting in loss of, or delay in, market acceptance and sales, 
diversion of development resources, injury to the Company's 
reputation, or increased service and warranty costs, any of which 
could have a material adverse effect on the Company's business, 
results of operations and financial condition.  See "Products and 
Technology." 

International Operations, Foreign Currency Fluctuations.  
International revenue, or revenue derived from sales to customers 
in foreign countries, accounted for approximately 9.8%, 9.3% and 
16.0% of the Company's revenue in 1995, 1996 and 1997, 
respectively.  The majority of this international revenue has come 
from Europe.  The Company believes that its continued growth and 
profitability will require further expansion of its international 
operations.  To successfully expand international sales, the 
Company must establish additional foreign operations, hire 
additional personnel and recruit additional international 
resellers.  To the extent that the Company is unable to do so in a 
timely manner, the Company's growth in international sales, if any, 
will be limited and the Company's business, results of operations 
and financial condition could be materially adversely affected.  

 As the Company continues to expand its international 
operations, significant costs may be incurred before achieving any 
additional international revenues, which could have a material 
adverse effect on the Company's business, results of operations and 
financial condition.  In addition, future increases in the value of 
the U.S.  dollar could make the Company's products less competitive 
in foreign markets.  There are certain risks inherent in doing 
business on an international level, such as unexpected changes in 
regulatory requirements, export restrictions, tariffs and other 
trade barriers, difficulties in staffing and managing foreign 
operations, longer payment cycles, problems in collecting accounts 
receivable, political instability, changes in foreign economic 
conditions, fluctuations in currency exchange rates, seasonal 
reductions in business activity during the summer months in Europe 
and certain other parts of the world and potentially adverse tax 
consequences, any of which could adversely impact the success of 
the combined company's international operations.  The Company's 
foreign subsidiaries operate primarily in local currencies, and 
their results are translated into US dollars.  If the value of the 
US dollar increases relative to foreign currencies, the Company's 
operating results could be materially adversely affected.  In 
particular, revenue from sales in the Pacific Rim could be 
adversely affected by declines in the value of such currencies 
against the dollar.  In addition, the overall weakness of these 
economies could adversely affect revenue from the Pacific Rim.  
Although the Company has not experienced these effects in a 
meaningful way to date, there can be no assurance that it will not 
experience them in the future.  There can be no assurance that one 
or more of such factors will not have a material adverse effect on 
the Company's future international operations and, consequently, on 
its business, operating results and financial condition.  

Competition.  The front-office automation software market is 
intensely competitive, highly fragmented and subject to rapid 
change.  Because the Company offers multiple applications that can 
be purchased separately or integrated as part of Vantive 
Enterprise, the Company competes with a variety of other 
businesses depending on the target market for their applications 
software products.  These competitors include a select number of 
businesses targeting the enterprise-level and department-level 
front-office markets, such as Astea International, Inc., Aurum 
Software, Inc.  (a subsidiary of The Baan Company), Clarify, Inc., 
Onyx Software, Scopus Technology, Inc.  and Siebel Systems, Inc.  
In March 1998, Siebel Systems, Inc.  and Scopus Technology, Inc.  
announced that they had entered into a definitive agreement for 
Siebel to acquire all of the outstanding shares of Scopus 
Technology, Inc.  

  The Company also competes with a substantial number of 
businesses that offer products targeted at one or more specific 
markets, including the customer support market, the help desk 
market, the quality assurance market and the sales and marketing 
automation market, such as Remedy Corporation and Software 
Artistry, Inc.  (which was recently acquired by the IBM 
subsidiary, Tivoli Systems, Inc.).  The Company believes that such 
point solution providers may expand their product offerings, which 
could provide increased competition for the company across its 
market segments.  The Company also competes with third party 
professional service organizations that develop custom software 
and with internal information technology departments of customers 
that develop customer interaction applications.  Among the 
Company's current and potential competitors are also a number of 
large hardware and software businesses that may develop or acquire 
products that compete with the Company's products.  In this 
regard, SAP AG, Oracle and The Baan Company have each introduced 
sales automation and/or customer support modules as part of their 
application suites.  Oracle has announced the creation of a 
network of third party dealers that will sell Oracle's application 
suites exclusively to medium-sized businesses.  

The Company expects that large software vendors in the 
enterprise resource planning market will continue to enter and 
pursue the front-office automation market.  These competitors have 
significantly greater financial, marketing, service, support, 
technical and other resources than the Company.

The Company also expects that competition will increase as a 
result of software industry consolidations.  Current and potential 
competitors have established or may establish cooperative 
relationships among themselves or with third parties to increase 
the ability of their products to address the needs of the 
Company's prospective customers.  Accordingly, it is possible that 
new competitors or alliances among competitors may emerge and 
rapidly acquire significant market share.  The Company also 
expects that competition may increase as a result of both new 
software start ups entering the market as well as existing 
software industry vendors which may be planning to enter the 
market for front-office applications.  Increased competition is 
likely to result in price reductions, reduced operating margins 
and loss of market share, any of which could materially adversely 
affect the Company's business, results of operations and financial 
condition.  Many of the Company's current and potential 
competitors have significantly greater financial, marketing, 
service, support, technical and other resources than the Company.  
As a result, they may be able to respond more quickly to new or 
emerging technologies and changes in customer requirements, or to 
devote greater resources to the development, promotion, service 
and sale of their products than can the Company.  There can be no 
assurance that the Company will be able to compete successfully 
against current and future competitors or that competitive 
pressures faced by the Company will not materially adversely 
affect its business, results of operations and financial 
condition.

The Company believes that the principal competitive factors 
affecting its market include product features such as 
adaptability, scalability, ability to integrate with products 
produced by other vendors, functionality, ease of use and such 
other factors as product reputation, quality, performance, price, 
customer service and support, the effectiveness of sales and 
marketing efforts and company reputation.  Although the Company 
believes that its products currently compete favorably with 
respect to such factors, there can be no assurance that the 
Company can maintain its competitive position against current and 
potential competitors, especially those with significantly greater 
financial, marketing, service, support, technical and other 
resources.

Management of Expanding Operations; Dependence Upon Key 
Personnel.  The Company's ability to compete effectively and to 
manage future growth, if any, will require the Company to continue 
to improve its financial and management controls, reporting systems 
and procedures on a timely basis and expand, train and manage its 
workforce.  There can be no assurance that the Company will be able 
to do so.  The Company's failure to do so could have a material 
adverse effect on the Company's business, results of operations and 
financial condition.  The Company has recently hired a significant 
number of employees, including senior sales, marketing, research 
and development and finance personnel and in order to maintain its 
ability to grow in the future, the Company will be required to 
significantly increase its total headcount.  In addition, the 
Company's future performance depends in significant part upon 
attracting and retaining key technical, sales, senior management 
and financial personnel.  In particular, delays in hiring sales or 
research and development personnel may have a material adverse 
effect on the Company's business, results of operations and 
financial condition.  The loss of the services of one or more of 
the Company's officers or the inability to recruit other additional 
senior management could have a material adverse effect on the 
Company's business, results of operations and financial condition.  
Competition for such personnel is intense and the inability to 
retain its key technical, sales, senior management and financial 
personnel or to attract, assimilate or retain other highly 
qualified technical, sales, senior management and financial 
personnel in the future on a timely basis could have a material 
adverse effect on the Company's business, results of operations and 
financial condition.  

Increased Use of Third Party Software.  The Company currently 
markets a proprietary application development environment for its 
customers to tailor its products.  This application development 
environment is also used by the Company to build and modify its 
products.  The Company believes, based on interactions with its 
customers and potential customers, that it currently derives a 
competitive advantage from this proprietary application development 
environment.  However, the Company believes that competitive 
pressures, technological changes demanded by customers and 
significant advances in the sophistication of third party 
application development tools such as Visual Basic will require the 
Company to make greater use of third party software in the future.  
The greater use of third party software could require the Company 
to invest significant resources in rewriting some or all of its 
software applications products utilizing third party software 
and/or to enter into license arrangements with third parties which 
could result in higher royalty payments and a loss of product 
differentiation and any competitive advantage associated with the 
proprietary development environment.  There can be no assurance 
that the Company would be able to successfully rewrite its 
applications or enter into commercially reasonable licenses and the 
costs of, or inability or delays in, doing so could have a material 
adverse effect on the Company's business, results of operations and 
financial condition.  

Dependence on Emerging Markets for Front-Office Automation 
Software; Product Concentration.  The Company's future financial 
performance will depend in large part on the growth in demand for 
individual front-office automation applications as well as the 
number of organizations adopting comprehensive front-office 
automation software information systems.  To date, much of the 
Company's license revenues have resulted from sales of individual 
applications, particularly Vantive Support and Vantive HelpDesk.  
The markets for these applications are relatively new and 
undeveloped and failure of these markets to expand would have a 
material adverse effect on the Company's business, results of 
operations and financial condition.  Additionally, the Company is 
investing in the sales, field service and quality automation 
markets.  Should these markets fail to develop, not accept the 
Company's products or cause the company to lose new business and/or 
customers in its traditional markets, there would be an adverse 
effect on the Company's business, results of operations and 
financial condition.

The Company believes that an important competitive advantage for 
its software applications is their ability to be integrated with 
one another and with other back-office software applications to 
create an enterprise-wide information system.  If the demand for 
integrated suites of front-office automation applications fails to 
develop, or develops more slowly than the Company currently 
anticipates, it could have a material adverse effect on the demand 
for the Company's applications and on its business, results of 
operations and financial condition.  In addition, any other factor 
adversely affecting the demand for the Company's existing 
applications could have a material adverse effect on the Company's 
business, results of operations and financial condition.

Need to Expand Distribution Channels and Successfully Leverage 
Third Party Relationships.  An important element of the Company's 
distribution strategy is to expand its direct sales force, to 
create additional relationships with third parties and to dedicate 
certain direct sales resources and leverage third party 
relationships to cover key vertical markets.  An important element 
of the Company's strategy is to integrate its products with 
products from enterprise resource planning ("ERP") vendors.  The 
Company is currently investing and intends to continue to invest, 
significant resources toward these strategies, which could 
adversely affect the Company's operating margins.  In this regard, 
the Company has recently hired and continues to hire significant 
numbers of direct salespeople.  Competition for salespeople is 
intense and there can be no assurance that the Company can retain 
its existing salespeople or that it can attract, assimilate and 
retain additional highly qualified salespeople in the future.  The 
strategy also depends, in large part, on attracting and retaining 
beneficial third party relationships.  There also can be no 
assurance that the Company will be able to attract and retain 
appropriate high-end integrators, resellers, other third party 
distributors or ERP vendors.  The Company's agreements with these 
third parties are not exclusive and, in many cases, may be 
terminated by either party without cause.  In addition, many of 
these third parties sell or co-market competing product lines.  
Therefore, there can be no assurance that any of these parties will 
continue to represent or recommend the Company's products.  There 
also can be no assurance that the Company will effectively identify 
key vertical markets.  The inability to recruit, or the loss of, 
important direct sales personnel, high-end integrators, resellers, 
other third party distributors or ERP vendors, or the failure to 
effectively identify key vertical markets, could have a material 
adverse effect on the Company's business, results of operations and 
financial condition.

Possible Volatility of Stock Price.  Future announcements 
concerning the Company or its competitors, quarterly variations in 
operating results, announcements of technological innovations, the 
introduction of new products or changes in product pricing policies 
by the Company or its competitors, proprietary rights or other 
litigation, changes in earnings estimates by analysts or other 
factors could cause the market price of the Common Stock to 
fluctuate substantially.  In addition, stock prices for many 
technology companies fluctuate widely for reasons which may be 
unrelated to operating results of such companies.  These 
fluctuations, as well as general economic, market and political 
conditions such as changes in interest rates, recessions or 
military conflicts, may materially and adversely affect the market 
price of the Company's Common Stock.  In the past, following 
periods of volatility in the market price of a company's 
securities, securities class action litigation has often been 
instituted against such companies.  Such litigation could result in 
substantial costs and a diversion of management's attention and 
resources, which could have a material adverse effect on the 
Company's business, results of operations and financial condition.

Dependence on Licensed Technology.  Vantive licenses technology 
on a non-exclusive basis from several businesses for use with its 
products and anticipates that it will continue to do so in the 
future.  The inability of the Company to continue to license these 
products or to license other products for use with its products or 
substantial increases in royalty payments under these third party 
licenses could have a material adverse effect on its business, 
results of operations and financial condition.  In addition, the 
effective implementation of the Company's products depends upon the 
successful operation of these licensed products in conjunction with 
the Company's products and therefore any undetected errors in such 
licensed products may prevent the implementation or impair the 
functionality of the Company's products, delay new product 
introductions and/or injure the Company's reputation.  Such 
problems could have a material adverse effect on the Company's 
business, results of operations and financial condition.

Dependence on Proprietary Technology; Risks of Infringement.  
The Company's success is heavily dependent upon proprietary 
technology.  The Company relies primarily on a combination of 
copyright, trademark and trade secrets laws, as well as 
confidentiality procedures and contractual provisions to protect 
its proprietary rights.  There can be no assurance that such 
measures will be adequate to protect the Company from infringement 
of its technology.  The Company presently has no patents or patent 
applications pending.  Despite the Company's efforts to protect its 
proprietary rights, attempts may be made to copy aspects of the 
Company's products or to obtain and use information that the 
Company regards as proprietary.  In particular, as the Company 
provides its licensees with access to the proprietary information 
underlying the Company's licensed applications, there can be no 
assurance that licensees or others will not develop products which 
infringe the Company's proprietary rights.  

 Policing unauthorized use of the Company's products is 
difficult and while the Company is unable to determine the extent 
to which piracy of its software products exists, software piracy 
can be expected to be a persistent problem.  In addition, the laws 
of some foreign countries do not protect the Company's proprietary 
rights to as great an extent as do the laws of the United States.  
There can be no assurance that the Company's means of protecting 
its proprietary rights will be adequate or that the Company's 
competitors will not independently develop similar technology.  The 
Company is not aware that any of its products infringe the 
proprietary rights of third parties, although the Company has in 
the past and may in the future, receive communications alleging 
possible infringement of third party intellectual property rights.  
The Company expects that software product developers will 
increasingly be subject to infringement claims as the number of 
products and competitors in the Company's target markets grows and 
the functionality of products in such markets overlaps.  Any such 
claims, with or without merit, could be time-consuming, result in 
costly litigation, cause product shipment delays or require the 
Company to enter into royalty or licensing agreements.  Such 
royalty or licensing agreements, if required, may not be available 
on terms acceptable to the Company or at all, which could have a 
material adverse effect upon the Company's business, results of 
operations and financial condition.  See "Business-Intellectual 
Property and Other Proprietary Rights."

Product Liability.  The Company's license agreements with its 
customers typically contain provisions intended to limit the 
Company's exposure to potential product liability claims.  It is 
possible that the limitation of liability provisions contained in 
the Company's agreements may not be effective.  Although the 
Company has not experienced any product liability claims to date, 
the sale and support of products by the Company and the 
incorporation of products from other businesses may entail the risk 
of such claims.  A successful product liability action brought 
against the Company could have a material adverse effect upon the 
Company's business, results of operations and financial condition.

Year 2000 Compliance.  Many currently installed computer systems 
and software products are coded to accept only two digit entries in 
the date code field.  These date code fields will need to accept 
four digit entries to distinguish 21st century dates from the 20th 
century dates.  As a result many companies' software and computer 
systems may need to be upgraded or replaced in order to comply with 
such "Year 2000" requirements.  Although the Company believes 
that its products and systems are Year 2000 compliant, the Company 
utilizes third-party equipment and software that may not be Year 
2000 compliant.  Failure of such third-party equipment or software 
to operate properly with regard to Year 2000 and thereafter could 
require the Company to incur unanticipated expenses to address any 
problems, which could have a material adverse effect on the 
Company's business, operating results and financial condition.  The 
business, operating results and financial condition of the 
Company's customers could be adversely affected to the extent that 
they utilize third-party software products which are not Year 2000 
compliant.  Furthermore, the purchasing patterns of customers or 
potential customers may be affected by Year 2000 issues as 
companies expend significant resources to correct their current 
systems for Year 2000 compliance.  These expenditures may result in 
reduced funds available to purchase products and services such as 
those offered by the Company, which could have a material adverse 
effect on the Company's business, operating results and financial 
condition.  

Risks Associated with Potential Acquisitions.  As part of its 
business strategy, the Company expects to review acquisition 
prospects that would complement its existing product offerings, 
augment its market coverage or enhance its technological 
capabilities, or that may otherwise offer growth opportunities.  
Future acquisitions by the Company could result in potentially 
dilutive issuances of equity securities, the incurrence of debt and 
contingent liabilities or amortization expenses related to goodwill 
and other intangible assets, any of which could materially 
adversely affect the Company's operating results and/or the price 
of the Company's Common Stock.  Acquisitions entail numerous risks, 
including difficulties in the assimilation of acquired operations, 
technologies and products, diversion of management's attention to 
other business concerns, risks of entering markets which the 
Company has no or limited prior experience and potential loss of 
key employees of acquired organizations.  No assurance can be given 
as to the ability of the Company to successfully integrate any 
businesses, products, technologies or personnel that might be 
acquired in the future, and the failure of the Company to do so 
could have a material adverse effect on the business, operating 
results and financial condition of the Company.  See "Liquidity 
and Capital Resources."


Item 8. Financial Statements and Supplementary Data

The Financial Statements and supplemental data of the Company 
required by this item are set forth at the pages indicated at 
Item 14(a).


Item 9. Changes in and Disagreements with Accountants on 
        Accounting and Financial Disclosure

         None.


PART III

Item 10.         Directors and Executive Officers of the Registrant

Information relating to the directors and executive officers of 
the Company is set forth in Part I of this report under the 
caption "DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT."

Information required by this item with respect to compliance 
with Section 16(a) of the Securities Exchange Act of 1934 is 
incorporated by reference from the definitive proxy statement for 
the Company's 1998 annual meeting of stockholders to be filed with 
the Commission pursuant to Regulation 14A not later than 120 days 
after the end of the fiscal year covered by this Form (the "Proxy 
Statement") under the caption "EXECUTIVE COMPENSATION AND OTHER 
MATTERS."


Item 11.         Executive Compensation

The information required by this Item is incorporated by 
reference from the Proxy Statement under the caption "EXECUTIVE 
COMPENSATION AND OTHER MATTERS."


Item 12.         Security Ownership of Certain Beneficial Owners and 
                 Management

The information required by this Item is incorporated by 
reference from the Proxy Statement under the caption "STOCK 
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT."


Item 13.         Certain Relationships and Related Transactions

The information required by this Item is incorporated by 
reference from the Proxy Statement under the caption "CERTAIN 
RELATIONSHIPS AND RELATED TRANSACTIONS."

<PAGE>
PART IV

Item 14.         Exhibits, Financial Statement Schedules and Reports 
                 on Form 8-K

        (a)     The following documents are filed as a part of this 
                Form:

                1.      Financial Statements-
                        Report of Independent Public Accountants        

                        Consolidated Balance Sheets-
                        As of December 31, 1997 and 1996         

                        Consolidated Statements of Operations-
                        For the Three Years Ended December 31, 1997    

                        Consolidated Statements of Stockholders' Equity-
                        For the Three Years Ended December 31, 1997    

                        Consolidated Statements of Cash Flows-
                        For the Three Years Ended December 31, 1997    

                        Notes to Consolidated Financial Statements      

                2.      List of Subsidiaries     

                        Consent of Independent Public Accountants        

                        Valuation and Qualifying Accounts      

       All other schedules are omitted because they are  not applicable or
       the required information is shown  in the consolidated financial
       statements or notes thereto.




                3.      Exhibits:  See Index to Exhibits on page 37.  
                        The Exhibits listed in the accompanying Index to
                        Exhibits are filed or incorporated by reference as
                        part of this report.

        (b)     Reports on Form 8-K:

                        Report on Form 8-K filed on September 26, 1997
                        Report on Form 8-KA filed on November 4, 1997.  

<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To The Vantive Corporation:

We have audited the accompanying consolidated balance  sheets of The Vantive
Corporation, (a Delaware  corporation) and subsidiaries as of December 31,
1997  and 1996, and the related consolidated statements of  operations,
stockholders' equity and cash flows for  each of the three years in the period
ended December  31, 1997.  These consolidated financial statements and  the
schedule referred to below are the responsibility  of the Company's
management.  Our responsibility is to  express an opinion on these financial
statements and  schedule based on our audits.

We conducted our audits in accordance with generally  accepted auditing
standards.  Those standards require  that we plan and perform the audit to
obtain  reasonable assurance about whether the financial  statements are free
of material misstatement.  An  audit includes examining, on a test basis,
evidence  supporting the amounts and disclosures in the  financial statements.
 An audit also includes  assessing the accounting principles used and 
significant estimates made by management, as well as  evaluating the overall
financial statement  presentation.  We believe that our audits provide a 
reasonable basis for our opinion.

In our opinion, the consolidated financial statements  referred to above
present fairly, in all material  respects, the financial position of The
Vantive  Corporation and subsidiaries as of December 31, 1997  and 1996, and
the results of their operations and  their cash flows for each of the three
years in the  period ended December 31, 1997 in conformity with  generally
accepted accounting principles.

Our audits were made for the purpose of forming an  opinion on the basic
financial statements taken as a  whole.  The schedule listed under Item 14(a)2
is  presented for purposes of complying with the  Securities and Exchange
Commission's rules and is not  a part of the basic financial statements.  This
 schedule has been subjected to the auditing procedures  applied in our audits
of the basic financial statements and, in our opinion, fairly states in all 
material respects the financial data required to be  set forth therein in
relation to the basic financial  statements taken as a whole.

                                                            ARTHUR ANDERSEN LLP


San Jose, California
January 21, 1998 
<PAGE>

                            THE VANTIVE CORPORATION
                          CONSOLIDATED BALANCE SHEETS
               (In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
                                                          December 31,
                                                      --------------------
                                                        1997       1996
                                                      ---------  ---------
<S>                                                   <C>        <C>
                            ASSETS
CURRENT ASSETS:
    Cash and cash equivalents......................    $77,583    $26,017
    Short-term investments.........................     23,800      6,853
    Accounts receivable, net of allowance for          
      doubtful accounts of $1,820 and $780 in 1997     
      and 1996, respectively.......................     33,295     13,775
    Prepaid expenses and other current assets......     11,896      4,492
                                                      ---------  ---------
             Total current assets..................    146,574     51,137
Property and equipment, net........................     12,465      6,764
Other assets.......................................      3,700        463
                                                      ---------  ---------
TOTAL ASSETS.......................................   $162,739    $58,364
                                                      =========  =========

            LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
    Accounts payable...............................     $3,680     $3,230
    Accrued liabilities............................     23,868      7,760
    Current portion of capital lease obligations...        270        377
    Deferred revenues..............................      9,827      6,811
                                                      ---------  ---------
             Total current liabilities.............     37,645     18,178

Convertible debt                                        69,000         --
Capital lease obligations, net of current                   25
  portion..........................................                   346
Other..............................................        337        409
STOCKHOLDERS' EQUITY
    Preferred Stock:  $.001 par value, 2,000,000
    shares authorized; no shares issued and
      outstanding at December 31, 1997.............         --         --
    Common Stock:  $.001 par value, 50,000,000
      shares authorized; 25,275,191 and 24,140,441
      shares issued and outstanding at December 31,
      1997 and 1996, respectively..................         25         24
    Additional paid-in-capital.....................     56,741     33,410
    Cumulative translation adjustment..............        (98)       (25)
    Retained earnings (accumulated deficit)........       (936)     6,022
                                                      ---------  ---------
             Total stockholders' equity............     55,732     39,431
                                                      ---------  ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.........   $162,739    $58,364
                                                      =========  =========
</TABLE>
  The accompanying notes are an integral part of these consolidated financial
                                  statements.

<PAGE>

                            THE VANTIVE CORPORATION
                      CONSOLIDATED STATEMENT OF OPERATIONS
                    (In thousands, except per share amounts)
<TABLE> 
<CAPTION> 
                                                For the Years Ended December 31, 
                                               -----------------------------
                                                 1997      1996      1995
                                               --------- --------- ---------
<S>                                            <C>       <C>       <C>
REVENUES:
  License ................................      $76,471   $41,513   $16,631
  Service ................................       40,875    22,761     8,404
                                               --------- --------- ---------
           Total revenues.................      117,346    64,274    25,035

COST OF REVENUES:
  License ................................          736       392       163
  Service ................................       22,748    12,263     5,968
                                               --------- --------- ---------
           Total cost of revenues.........       23,484    12,655     6,131
                                               --------- --------- ---------
GROSS MARGIN..............................       93,862    51,619    18,904

OPERATING EXPENSES:
  Sales and marketing.....................       45,811    24,676    11,582
  Research and development................       17,508     7,261     3,319
  General and administrative .............        9,377     5,389     2,167
  Acquired in-process research                   
    and development (Note 3)..............       21,121       --        --
                                               --------- --------- ---------
           Total operating expenses.......       93,817    37,326    17,068
                                               --------- --------- ---------
INCOME FROM OPERATIONS....................           45    14,293     1,836
                                               --------- --------- ---------
OTHER INCOME (EXPENSE):
  Interest income ........................        2,773     1,445       534
  Interest expense .......................       (1,468)     (159)      (95)
                                               --------- --------- ---------
           Total other income.............        1,305     1,286       439
                                               --------- --------- ---------
INCOME BEFORE PROVISION
  FOR INCOME TAXES........................        1,350    15,579     2,275
PROVISION FOR INCOME TAXES................        8,308     4,674       232
                                               --------- --------- ---------
NET INCOME (LOSS).........................      ($6,958)  $10,905    $2,043
                                               ========= ========= =========

NET INCOME(LOSS) PER BASIC SHARE .........       ($0.28)    $0.45     $0.10

NET INCOME(LOSS) PER DILUTED SHARE .......       ($0.28)    $0.42     $0.09
                                               ========= ========= =========
 BASIC - SHARES USED IN PER SHARE
    COMPUTATION ..........................       24,570    24,008    21,034
                                               ========= ========= =========
 DILUTED - SHARES USED IN PER SHARE
    COMPUTATION ..........................       24,570    25,847    23,012
                                               ========= ========= =========
</TABLE>
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
<PAGE>

                            THE VANTIVE CORPORATION
                  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
               (In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
                                                                                                       Total
                                             Common Stock                               Retained   Stockholders'
                                        -------------------- Additional   Cumulative    Earnings        Equity 
                                                      Par      Paid-in   Translation  (Accumulated (Accumulated
                                          Shares     Value     Capital    Adjustment    Deficit)     Deficit)
                                        ----------- -------- ----------- ------------ ------------ -------------
<S>                                     <C>         <C>      <C>          <C>         <C>          <C>

BALANCE AT DECEMBER 31, 1993...........  3,241,670       $1        $161           --      ($6,366)      ($6,204)
   Exercise of stock options...........  1,377,376        1         103           --           --           104
   Repurchase of common stock..........   (100,000)      --          (9)          --           --            (9)
   Translation adjustment..............         --       --          --           (8)          --            (8)
   Net loss..........................           --       --          --           --         (548)         (548)
                                        ----------- -------- ----------- ------------ ------------ -------------
BALANCE AT DECEMBER 31, 1994...........  4,519,046        2         255           (8)      (6,914)       (6,665)
   Exercise of stock options...........  1,414,068        1         288           --           --           289
   Repurchase of common stock..........    (14,628)      --          (3)          --           --            (3)
   Conversion of mandatorily
     redeemable convertible preferred
     stock into common stock:
            Series A...................  3,523,106        2       1,487           --           --         1,489
            Series B...................  6,101,538        3       4,822           --           --         4,825
            Series C...................  2,381,718        1       2,067           --           --         2,068
            Series D...................  2,083,334        1       2,468           --           --         2,469
   Common stock issued in IPO,
     net of issusance costs of $2,644..  3,800,000        2      20,154           --           --        20,156
   Warrant exercised for common stock..     87,056       --          --           --           --          --
   Translation adjustment..............         --       --          --          (14)          --           (14)
   Net income..........................         --       --          --           --        2,043         2,043
                                        ----------- -------- ----------- ------------ ------------ -------------
BALANCE AT DECEMBER 31, 1995........... 23,895,238       12      31,538          (22)      (4,871)       26,657
   Exercise of stock options...........    246,854       --         498           --           --           498
   Repurchase of common stock..........    (44,452)      --         (20)          --           --           (20)
   Common stock issued under
     Employee Stock Purchase Plan......     42,801       --         324           --           --           324
   Translation adjustment..............         --       --          --           (3)          --            (3)
   Stock dividend (2-for-1 
     stock split)......................         --       12          --           --          (12)         --
   Disqualifying disposition of
     stock options.....................         --       --       1,070           --           --         1,070
   Net income..........................         --       --          --           --       10,905        10,905
                                        ----------- -------- ----------- ------------ ------------ -------------
BALANCE AT DECEMBER 31, 1996........... 24,140,441       24      33,410          (25)       6,022        39,431
   Exercise of stock options...........    461,227       --       1,333           --           --         1,333
   Repurchase of common stock..........    (19,588)      --          (7)          --           --            (7)
   Common stock issued under
     Employee Stock Purchase Plan......     37,540       --         630           --           --           630
   Issuance of common stock for                                                        
     ICC acquisition...................    655,571        1      19,654           --           --        19,655
   Translation adjustment..............         --       --          --          (73)          --           (73)
   Disqualifying disposition of
     stock options.....................         --       --       1,721           --           --         1,721
   Net loss............................         --       --          --           --       (6,958)       (6,958)
                                        ----------- -------- ----------- ------------ ------------ -------------
BALANCE AT DECEMBER 31, 1997........... 25,275,191      $25     $56,741         ($98)       ($936)      $55,732
                                        =========== ======== =========== ============ ============ =============
</TABLE>
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
<PAGE>

                            THE VANTIVE CORPORATION
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
<TABLE>
<CAPTION>
                                                For the Years Ended December 31, 
                                                --------------------------------
                                                   1997       1996       1995
                                                ---------- ---------- ----------
<S>                                             <C>        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)..........................    ($6,958)   $10,905     $2,043
   Adjustments to reconcile net income
      (loss) to net cash provided by
       operating activities:
  Write-off of acquired in-process research 
      and development...............               21,121         --         --
   Depreciation and amortization..............      2,519      1,388        637
   Provision for sales allowances and
      doubtful accounts...............              1,040        455        325
   Changes in operating assets and liabilities,
      net of acquisition-
      Increase in accounts receivable.........    (20,530)   (10,181)    (1,600)
      Increase in prepaid expenses and
        other current assets...........            (7,393)    (3,377)      (840)
      Increase in other assets................     (2,600)      (247)      (120)
      Increase (decrease) in accounts payable.        450      2,611       (442)
      Increase in accrued liabilities.........     15,850      4,581      2,321
      Increase (decrease) in
        in long-term liabilities..............       (725)       330         70
      Increase in deferred revenues...........      2,804      3,859      2,261
                                                ---------- ---------- ----------
          Net cash provided by 
            operating activities..............      5,578     10,324      4,655
                                                ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of short-term investments........    (48,378)   (36,363)    (8,815)
   Maturities of short-term investments.......     31,431     38,325         --
   Purchase of ICC, net of cash acquired......     (1,079)        --         --
   Purchases of property and equipment........     (8,130)    (5,180)    (1,483)
                                                ---------- ---------- ----------
          Net cash used in investing
            activities........................    (26,156)    (3,218)   (10,298)
                                                ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from issuance of
      convertible debt........................     69,000         --         --
   Net proceeds from issuance of common stock.      3,685      1,892     20,445
   Repurchase of common stock.................         (7)       (20)        (3)
   Payments on capital lease obligations......       (461)      (572)      (325)
                                                ---------- ---------- ----------
          Net cash provided by financing
            activities........................     72,217      1,300     20,117
                                                ---------- ---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS......    51,639      8,406     14,474
EFFECT OF EXCHANGE RATE CHANGES ON CASH........       (73)        (3)       (14)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.    26,017     17,614      3,154
                                                ---------- ---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD.......   $77,583    $26,017    $17,614
                                                ========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW ACTIVITY
   Cash paid for interest.....................     $1,468       $159       $101
                                                ========== ========== ==========
   Cash paid for income taxes.................     $5,864     $4,375        $80
                                                ========== ========== ==========
</TABLE>
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
<PAGE>

1. DESCRIPTION OF BUSINESS:

The Vantive Corporation (the "Company") designs,  markets and supports a suite
of software applications  in the front-office automation market that enables 
businesses to improve sales performance and enhance  customer loyalty.  The
Company's suite of products  addresses the front-office automation market and
is  called the Vantive Enterprise.  The Company also  performs consulting,
education and support services  for customers that license its products.  The
Company  has wholly-owned subsidiaries in Australia, Canada,  France, Germany,
the Netherlands, Singapore and the  United Kingdom.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

        Principles of Consolidation

        The consolidated financial statements include the  accounts of the
Company and its subsidiaries.  All   intercompany accounts and transactions 
have been  eliminated in consolidation.

        Cash and Cash Equivalents

        For purposes of the Statements of Cash Flows, the  Company considers
all highly liquid investments with  an original maturity of 90 days or less to
be cash equivalents.  Cash equivalents primarily consist of  certificates of
deposit, money market accounts,  treasury bills and commercial paper with a
maturity of  less than 90 days.

        Statements of Cash Flows

        For purposes of the Statements of Cash Flows, non- cash transactions
for the years ended  December 31, 1997, 1996 and 1995 include capital lease 
additions of approximately $35,000, $194,000 and  $781,000, respectively.  For
the year ended December  31, 1997, non-cash transactions also include the 
issuance of $19,655,000 of common stock and potential  common shares to
acquire Innovative Computer Concepts,  Inc.  (See Note 3).


        Investments

        The Company accounts for its investments under the  provision of
Statement of Financial Accounting  Standards No.  115 (SFAS 115), "Accounting
for  Certain Investments in Debt and Equity Securities."   The Company has
classified all marketable debt  securities and long-term debt investments as
held-to- maturity and has accounted for these investments at  amortized cost.

        As of December 31, 1997, the Company's investments  consisted of the
following (in thousands):


                                                   Securities
                                                    Maturing
                                        Amortized    Within
                                           Cost       One
                                          Basis       Year
                                        ---------- ----------
 Debt securities by the U.S. Treasury
   and other U.S. Government agencies     $13,054    $13,054
 Corporate debt securities                 10,746     10,746
                                        ---------- ----------
                                          $23,800    $23,800
                                        ========== ==========

   As of December 31, 1996, the Company's investments consisted of the
following (in thousands):
                                                   Securities
                                                    Maturing
                                        Amortized    Within
                                           Cost       One
                                          Basis       Year
                                        ---------- ----------
 Debt securities by the U.S. Treasury
   and other U.S. Government agencies        $973       $973
 Corporate debt securities                  5,880      5,880
                                        ---------- ----------
                                           $6,853     $6,853
                                        ========== ==========

At December 31, 1997 and 1996, the aggregate fair  value of these securities
approximated cost and the  amount of gross unrealized gains or gross unrealized 
losses were not significant.  

        Concentration of Credit Risk

Financial instruments that potentially subject the  Company to a concentration
of credit risk principally  consist of accounts receivable.   As of December
31,  1997, approximately 37% of accounts receivable were  concentrated with
five customers.   The Company  performs ongoing credit evaluations of its
customer's  financial condition and the risk of loss with respect  to its
trade receivables is further mitigated by the  fact that the Company's
customer base is comprised of well established companies.  The Company
provides  reserves for credit losses and such losses have been  insignificant.

        Property and Equipment 

Property and equipment are carried at cost and  depreciated or amortized using
the straight-line  method over the estimated useful lives of the related 
assets (or over the lease term if it is shorter for  leasehold improvements),
which range from three to  five years.

        Revenue Recognition

The Company generates revenues from licensing the  rights to use its software
products directly to end- users and indirectly through sublicense fees from 
resellers.  The Company also generates revenues from  sales of customer
support, consulting and training  services performed for customers that
license its  products.

Revenues from software license agreements are  recognized upon shipment of the
software if collection  is probable, payment is due within one year, the fee 
is fixed or determinable and vendor specific evidence  exists to allocate the
total fee to all elements of  the arrangement.  If an acceptance period is
required,  revenues are recognized upon the earlier of customer  acceptance or
the expiration of the acceptance period.   The Company enters into reseller
arrangements that  typically provide for sublicense fees payable to the 
Company based on a percent of the Company's list  price.  Sublicense fees are
generally recognized as  reported by the reseller in re-licensing the
Company's  products to end-users.  In certain circumstances,  sublicense fees
are recognized upon the initial sale  if all products subject to sublicensing
are shipped in  the current period, no rights of return policy exits, 
collection is probable, payment is due within one  year, and fee is fixed or
determinable.  If these  conditions are not met, the Company does not
recognize  sublicense fees until reported by the reseller in re- licensing the
Company's products to end-users.

Revenues from customer support services are  recognized ratably over the term
of the support period.   If customer support services are included free or at
a  discount in a license agreement, these amounts are  allocated out of the
license fee at their fair market  value based on the value established by
independent  sale of the customer support services to customers.   Consulting
revenues are primarily related to  implementation services performed on a time
and  materials basis under separate service arrangements  related to the
installation of the Company's software  products.  Revenues from consulting
and training  services are recognized as services are performed.  If  a
transaction includes both license and service  elements, license fee revenue
is recognized upon  shipment of the software, provided services do not 
include significant customization or modification of  the base product and the
payment terms for licenses are  not subject to acceptance criteria.  In cases
where  license fee payments are contingent upon the acceptance  of services,
revenues from both the license and the  service elements are deferred until
the acceptance  criteria are met.

Cost of license revenues includes the costs of  product media, product
duplication and manuals.  Cost  of service revenues is primarily comprised of 
employee-related costs and fees for third-party  consultants incurred in
providing consulting, customer  support and training services.

        Deferred revenues primarily relate to customer  support fees, which
have been paid by the customers  prior to the performance of these services.

        Major Customers

        During 1997, 1996 and 1995 no customer accounted  for 10% or more of
total revenues.  

        Export Sales

        Export sales consist of domestic sales to customers  in foreign
countries.  During 1997, 1996 and 1995,  export sales were less than 10% of
total revenues.

        International Revenues

        International revenues, or revenues derived from  sales to customers
in foreign countries, primarily in  Europe, accounted for approximately 16.0%,
9.3% and  9.8% of the Company's revenue in 1997, 1996 and 1995,  respectively.
Geographic information for the year  ended December 31, 1997 is as follows (in
thousands):
<TABLE>
<CAPTION>

                                            For the Year Ended December 31, 1997
                               --------------------------------------------------
                                                             Other/
                               United States   Europe     Eliminations    Total
                               ------------  -----------  ------------  ---------
<S>                            <C>           <C>          <C>           <C>
Total revenues                    $101,763      $12,913        $2,670    117,346

Income (loss) from operations*      21,364         (363)          165     21,166

Total assets                      $178,046       $3,556      ($18,863)   162,739

</TABLE>

*Income from operations excludes the one-time charge  related to acquired
in-process research and  development.  

Software Development Costs

        The Company capitalizes internally generated  software development
costs under the provision of  Statement of Financial Accounting Standards No. 
86  (SFAS 86), "Accounting for Costs of Computer Software  to be Sold, Leased
or Otherwise Marketed."   Capitalization of computer software development
costs  begins upon the establishment of technological  feasibility, which the
Company has defined as  completion of a working model.  Internally generated 
capitalizable software development costs have not been  material for years
ended December 31, 1997, 1996 and  1995.  The Company has charged its software
 development costs to research and development expense  in the accompanying
consolidated statements of  operations.

        Foreign Currency Translation

        The functional currency of the Company's  subsidiaries is the local
currency.  Accordingly, the  assets and liabilities of operations outside the 
United States were translated into United States  dollars using current
exchange rates and the effects  of foreign currency translation adjustments
are  included as a component of stockholders' equity.           

  Earnings (Loss) per Share:

        Effective December 31, 1997, the Company  retroactively adopted the
provisions of Statement of  Financial Accounting Standards No.  128 (SFAS
128),  "Earnings per Share".  SFAS 128 requires companies  to compute net
income (loss) per share under two  different methods, basic and diluted per
share data  for all periods for which an income statement is  presented. 
Basic earnings per share was computed by  dividing net income by the weighted
average number of  common shares outstanding during the period.  Diluted 
earnings per share reflects the potential dilution  that could occur if the
income were divided by the  weighted-average number of common and potential
common  shares outstanding during the period.  Diluted  earnings per share was
computed by dividing net income  by weighted average number of common shares
and  potential common shares from outstanding stock options  for years ended
December 31, 1996 and 1995.  Potential  common shares were calculated using
the treasury stock  method and represent incremental shares issuable upon 
exercise of the Company's outstanding options.  For  the year ended December
31, 1997, the diluted loss per  share calculation excludes effects of
convertible debt  securities and outstanding stock options as such  inclusion
would be anti-dilutive.  The following table  provides reconciliation of the
numerators and  denominators used in calculating basic and diluted  earnings
per share for the prior three years.

                     (In thousands, except per share data)
<TABLE> 
<CAPTION> 
                                                     For the Years Ended December 31, 
                                                     -----------------------------
                                                       1997      1996      1995
                                                     --------- --------- ---------
<S>                                                  <C>       <C>       <C>


 Net income (loss) . . . . . . . . . . . . . . . .    ($6,958)  $10,905    $2,043

Basic Earnings Per Share. . . . . .  . . . . . . . 
 Income (loss) available to common shareholders. .    ($6,958)  $10,905    $2,043
 Weighted average common shares outstanding. . . .     24,570    24,008    21,034
                                                     --------- --------- ---------
 Basic earnings (loss) per share . . . . . . . . .     ($0.28)    $0.45     $0.10
                                                     ========= ========= =========
Diluted Earnings Per Share. . . . . . . . . . . . 
 Income (loss) available to common shareholders. .    ($6,958)  $10,905    $2,043
 Weighted average common shares outstanding. . . .     24,570    24,008    21,034

 Common stock option grants (unless anti-dilutive)          --    1,839     1,978
                                                     --------- --------- ---------
 Total weighted average common shares
    and equivalents  . . . . . . . . . . . . .         24,570    25,847    23,012
                                                     ========= ========= =========

 Diluted earnings (loss) per share . . . . . . . . .   ($0.28)    $0.42     $0.09
                                                     ========= ========= =========

</TABLE>

        Options to purchase approximately 4.8 million  shares of common stock
were outstanding at December  31, 1997, but were not included in the
computation of  diluted earnings per share as a result of their anti- dilutive
effect due to the loss available to common  shareholders.  During 1996 and
1995, options to  purchase approximately 100,000 weighted average shares  were
excluded because the options' exercise price was  greater than the average
market price of the common  shares.

        Use of Estimates

        The preparation of consolidated 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 and disclosure of  contingent assets and liabilities at the date
of the  consolidated financial statements and the reported  amounts of
revenues and expenses during the reporting  period.  

Estimates are used for, but not limited to, the  accounting for doubtful
accounts, depreciation and  amortization, taxes and contingencies.  Actual
results  could differ from those estimates.

3. ACQUISITION:

On August 26, 1997, the Company completed the  acquisition of Innovative
Computer Concepts, Inc. ("ICC"), a leading developer of software that 
improves spare parts procurement and management for  field service
applications (the "Merger").  The  Company paid $125,000 in cash and issued
655,571 shares  of its common stock in exchange for all outstanding  shares of
ICC.  The Company also assumed all  outstanding ICC options, which were
converted to  options to purchase approximately 32,381 shares of the 
Company's common stock, resulting in a total purchase  price of  $21 million
(including direct costs of the  acquisition).  The Merger was recorded under
the  purchase method of accounting and therefore the results  of operations of
ICC and the fair value of the acquired  assets and liabilities were included
in the Company's  financial statements beginning on the acquisition date.  
Upon consummation of the Merger, ICC became a wholly  owned subsidiary of the
Company.  In connection with  the acquisition, the Company received an
appraisal of  the intangible assets, which indicated that  approximately $21.1
million represented in-process  research and development.   The acquired
in-process  research and development was expensed in the quarter  ended
September 30, 1997.  In addition, the Company has  recorded goodwill of
approximately $680,000 that will  be amortized on a straight-line basis over
five years.   

The following table presents the unaudited pro  forma results assuming that
the Company had acquired  ICC at the beginning of 1997 and 1996, respectively.
Net income and basic and diluted earnings per share  amounts have been
adjusted to exclude the write-off of  acquired in process research and
development of $21.1  million and include the goodwill amortization of 
$136,000 for the twelve months ended December 31, 1997  and 1996.  This
information may not necessarily be  indicative of the future combined results
of  operations of the Company.

                              (In thousands, except per share data)
                              For the Years Ended December 31, 
                              ----------------------------
                                  1997            1996
                              ----------------------------
  Revenues                       $117,787         $65,982
  Net Income                       13,550          10,521
  Basic Earnings Per Share           0.54            0.43
  Diluted Earnings Per Share         0.49            0.40

4.      PROPERTY AND EQUIPMENT:

   Property and equipment, at cost, consist of the following (in thousands):


                                                        December 31,
                                                    -------------------
                                                      1997      1996
                                                    --------- ---------
   Computer and office equipment . . . . . . . . .   $10,105    $5,726
   Furniture and fixtures  . . . . . . . . . . . .     3,448     1,899
   Leasehold improvements  . . . . . . . . . . . .       489       366
   Purchased software  . . . . . . . . . . . . . .     3,326     1,158
                                                    --------- ---------
                                                      17,368     9,149
   Less accumulated depreciation and amortization.    (4,903)   (2,385)
                                                    --------- ---------
                                                     $12,465    $6,764
                                                    ========= =========
        Included in property and equipment are assets  acquired under capital
lease obligations with an  original cost of approximately $1,931,000 and  
$1,897,000 as of December 31, 1997 and 1996,  respectively.  Accumulated
amortization on the leased  assets was approximately $1,655,000 and 
$1,272,000 as of December 31, 1997 and 1996, respectively.

5.      ACCRUED LIABILITIES:

   Accrued liabilities consist of the following (in thousands):


                                                        December 31,
                                                    -------------------
                                                      1997      1996
                                                    --------- ---------

     Employee compensation . . . . . . . . . . . .    $2,290    $1,427
     Commissions . . . . . . . . . . . . . . . . .     4,328     2,395
     Taxes . . . . . . . . . . . . . . . . . . . .     4,532       106
     Other . . . . . . . . . . . . . . . . . . . .    12,718     3,832
                                                    --------- ---------
     Total . . . . . . . . . . . . . . . . . . . .   $23,868    $7,760
                                                    ========= =========



6.      COMMITMENTS AND CAPITAL LEASE OBLIGATIONS:

         Leases

        The Company leases its facilities under non- cancelable operating
leases which have expiration  dates ranging from 1998 through 2003.   Minimum
future  lease payments under non-cancelable capital and  operating leases as
of December 31, 1997 are  summarized as follows (in thousands):

                                                     Capital  Operating
                                                     Leases    Leases
                                                    --------- ---------
     1998  . . . . . . . . . . . . . . . . . . . .      $285    $2,037
     1999  . . . . . . . . . . . . . . . . . . . .        24     2,004
     2000  . . . . . . . . . . . . . . . . . . . .        --     2,038
     2001  . . . . . . . . . . . . . . . . . . . .        --     1,490
     2002  . . . . . . . . . . . . . . . . . . . .        --       805
     Thereafter  . . . . . . . . . . . . . . . . .        --       619
                                                    --------- ---------
       Total minimum lease payments  . . . . . . .       309    $8,993
                                                              =========
     Less: Amount representing interest
       at 10.0% - 11.2%  . . . . . . . . . . . . .       (14)
                                                    ---------
     Present value of lease payments . . . . . . .       295
     Less:  Current portion  . . . . . . . . . . .      (270)
                                                    ---------
     Long-term portion . . . . . . . . . . . . . .       $25
                                                    =========

        Rental expense was approximately $3,275,000,  $1,447,000 and $740,000
in 1997, 1996 and 1995,  respectively.

        Legal Proceedings

        The Company and its subsidiaries are subject to  legal proceedings,
claims and litigation arising in  the ordinary course of business.  The
Company's  management does not expect that the ultimate costs to  resolve
these matters will have a material adverse  effect on the Company's
consolidated financial  position, results of operations and cash flows.

7. CONVERTIBLE SUBORDINATED NOTES:

        On August 21, 1997, the Company sold an aggregate  of $69.0 million in
principal amount of convertible  subordinated notes, due August 2002, to
certain  investors in the United States and outside the United  States and
incurred approximately $2.4 million of  offering expenses in connection with
this issuance.   These notes have a 4.75% coupon over a five-year term  and
are convertible into the Company's common stock at  the investor's option, if
and when the share price  exceeds $41.93 per share.  The Company intends to
use  the net proceeds of $66.6 million for working capital  and other general
corporate purposes.

8. COMMON STOCK AND PREFERRED STOCK:

        The Company is authorized to issue 50,000,000  shares of Common Stock
and 2,000,000 shares of  undesignated Preferred Stock and the Board of 
Directors has the authority to issue the undesignated  Preferred Stock in one
or more series and to fix the  rights, preferences, privileges and
restrictions  thereof.

        Shares of common stock issued by the Company as a  result of the
exercise of stock options under the 1991  Stock Option Plan are subject to
stock repurchase agreements whereby the Company has the option to  repurchase
unvested shares upon termination of  employment at the original price paid for
the shares  (See Note 9).  As of December 31, 1997, 119,562 shares  of common
stock at $0.09 to $4.50 per share were  subject to repurchase.         

9.      STOCK OPTION AND EMPLOYEE STOCK PURCHASE PLANS:

        Under the Company's 1991 Stock Option Plan (the  "Option Plan"), the
Board of Directors may grant  incentive and nonqualified stock options to
employees,  directors and consultants.  The exercise price per  share for an
incentive stock option cannot be less  than the market price on the date of
grant.  The  exercise price per share for a nonqualified stock  option cannot
be less than 85% of the market price on  the date of grant.  Options granted
under the Option  Plan are immediately exercisable, subject to a right  of
repurchase in favor of the Company for all unvested  shares.  Option grants
under the Option Plan generally  expire ten years after the date of grant and
generally  vest over a four year period.  In addition, in the  event of a
Change in Control (as defined) of the  Company's ownership, the Company has
agreed with the  President and other officers that they will be  credited with
12 months of service for purposes of  option vesting.  As of December 31,
1997, a total of  8,200,000 shares of Common Stock have been authorized  by
the Company's stockholders for grant under the  plan.

        Option activity under the 1991 Stock Option Plan is  as follows:
                                                Options
                                                Outstanding 
                                                ------------   
                                   Shares                      Weighted
                                   Available    Number of      Average
                                   for Grant    Shares         Exercise Price
                                 ------------  ------------  ---------
  Balance, December 31, 1994  . .    174,058     1,582,252      $0.09
    Authorized  . . . . . . . . .  3,707,262            --         --
    Granted . . . . . . . . . . . (2,095,100)    2,095,100       3.12
    Exercised   . . . . . . . . .         --    (1,414,068)      0.20
    Canceled  . . . . . . . . . .     94,880       (94,880)      0.78
    Unvested shares repurchased .     14,628            --       0.81
                                 ------------  ------------
  Balance, December 31, 1995  . .  1,895,728     2,168,404       2.91
    Authorized  . . . . . . . . .         --            --         --
    Granted . . . . . . . . . . . (1,652,975)    1,652,975      18.82
    Exercised   . . . . . . . . .         --      (246,854)      2.08
    Canceled  . . . . . . . . . .    498,251      (498,251)      9.99
    Unvested shares repurchased .     44,452            --       8.79
                                 ------------  ------------
  Balance, December 31, 1996  . .    785,456     3,076,274      10.81
    Authorized  . . . . . . . . .  1,200,000            --         --
    Granted . . . . . . . . . . . (1,606,345)    1,606,345      25.13
    Exercised   . . . . . . . . .         --      (461,227)      3.46
    Canceled  . . . . . . . . . .     57,874       (57,874)     20.05
    Unvested shares repurchased .     22,608            --       0.39
                                 ------------  ------------  
  Balance, December 31, 1997  . .    459,593     4,163,518     $12.26
                                 ============  ============  =========

        As of December 31, 1997, all of the outstanding  options were
immediately exercisable in full on the  date of grant subject to repurchases
of unvested  shares by the Company at cost and at the option of the  Company
if employment is terminated.

        The Company's 1995 Outside Directors Stock Option  Plan (the
"Directors Plan") was adopted in July  1995.  A total of 400,000 shares of
Common Stock have  been reserved for issuance under the Directors Plan.   The
Directors Plan provides for the grant of  nonstatutory stock options to
certain nonemployee  directors of the Company, including an option to 
purchase 30,000 shares of Common Stock on the date on  which the optionee
first becomes a nonemployee  director of the Company and an additional option
to  purchase 10,000 shares of Common Stock on the next  anniversary of such
date.  The exercise price per  share of all options granted under the
Directors Plan  shall be equal to the market price of the Company's  Common
Stock on the date of grant of the option.  As  of December 31, 1997, options
to purchase 230,000  shares of Common Stock issued pursuant to the  Directors
Plan were outstanding of which none have  been exercised.

In October 1997, the Company adopted the 1997 Stock  Option Plan (the "1997
Plan") which provides for the  issuance of nonqualified stock options to
employees,  directors and consultants.  Under the terms of this  Plan, options
to purchase 500,000 shares of Common  Stock were reserved for issuance.  The
exercise price  per share for a nonqualified stock option cannot be  less than
85% of the market price on the date of  grant.  Options granted under the
Option Plan are  immediately exercisable, subject to a right of  repurchase in
favor of the Company for all unvested  shares.  Option grants under the Option
Plan generally  expire ten years after the date of grant and generally  vest
over a four-year period.  At December 31, 1997,  options to purchase 329,985
shares of Common Stock  issued pursuant to the 1997 Plan were outstanding.  
Options for 170,015 shares were available for future  grant under the 1997
Plan at December 31, 1997.  

The Company has an Employee Stock Purchase Plan  (the "Purchase Plan") under
which 700,000 shares of  common stock have been reserved for issuance.  The 
Purchase Plan enables eligible employees to purchase  Common Stock at 85% of
the lower of the fair market  value of the Company's Common Stock on the first
day  or the last day of each six-month purchase period.   During 1997 and
1996, approximately 37,540 shares and  42,801 shares, respectively, were
issued under the  Purchase Plan.

        The Company has adopted the disclosure provision of  SFAS No.  123,
"Accounting for Stock-Based  Compensation," which establishes a fair value
based  method of accounting for stock-based compensation  plans.  In
accordance with the provisions of SFAS No.123, the Company applies APB Opinion
25 and related  Interpretations in accounting for its stock option and  stock
purchase plans and accordingly, does not record  compensation costs.  If the
Company had elected,  beginning in 1996, to recognize cost based on fair 
value of the options granted at grant date as  prescribed by SFAS No.  123,
net income (loss) and net  income (loss) per share would have been reduced to
the  pro forma amounts indicated in the table below (in  thousands, except per
share amounts):
                               For the Years Ended December 31, 
                                     1997       1996
                                   ---------  ---------
Net income (loss):
       As reported                  ($6,958)   $10,905
       Pro forma                   ($19,340)    $7,904

Diluted earnings (loss) per share:
       As reported                   ($0.28)     $0.42
       Pro forma                     ($0.79)     $0.31

   The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions:

                               For the Years Ended December 31, 
                                     1997       1996
                                   ---------  ---------
Expected dividend yield                 0.0%       0.0%
Risk free interest rate                 5.2%       6.1%
Volatility                             81.8%      85.0%
Expected life beyond vest date         0.40       0.22

    The following table summarizes information concerning outstanding and
exercisable options at December 31, 1997:

                            Oustanding and Exercisable by Price Range
<TABLE>                            As of December 31, 1997
<CAPTION>
                            Options Oustanding               Options Exercisable
                    ------------------------------------  ------------------------
                                   Weighted                   
                                   Average    Weighted                  Weighted
                                  Remaining    Average                   Average
     Range of          Number    Contractual  Exercise       Number     Exercise
  Exercise Prices   Outstanding     Life        Price       Exercisable    Price
------------------- ------------ ----------- -----------  ------------ -----------
<S>                 <C>          <C>         <C>          <C>          <C>
  $ 0.08 - $ 1.50       574,403        7.23     $1.0340       551,656     $1.0729
  $ 2.00 - $ 4.50       544,699        7.47     $3.0730       544,699     $3.0730
  $ 7.00 - $11.75       462,625        8.04    $10.6830       462,625    $10.6830
  $12.75 - $12.75       603,749        8.50    $12.7500       603,749    $12.7500
  $15.81 - $21.00       293,996        8.82    $18.3752       221,496    $18.6617
  $21.38 - $21.38       509,655        9.87    $21.3750       179,670    $21.3750
  $22.25 - $25.25       547,684        9.50    $23.5782       497,684    $23.5710
  $26.00 - $29.13       497,334        9.19    $26.7822       474,834    $26.7660
  $29.53 - $33.00       520,633        9.24    $31.9128       497,508    $31.8971
  $33.75 - $35.13       196,875        9.01    $34.2287       196,875    $34.2287

------------------- ------------ ----------- -----------  ------------ -----------
  $  .08 - $35.13     4,751,653        8.64    $17.0026     4,230,796    $16.5283
=================== ============ =========== ===========  ============ ===========
</TABLE>
<PAGE>

    The following table summarizes information concerning outstanding and
exercisable options at December 31, 1996:

                            Oustanding and Exercisable by Price Range
<TABLE>                            As of December 31, 1996
<CAPTION>
                            Options Oustanding               Options Exercisable
                    ------------------------------------  ------------------------
                                   Weighted                   
                                   Average    Weighted                  Weighted
                                  Remaining    Average                   Average
     Range of          Number    Contractual  Exercise       Number     Exercise
  Exercise Prices   Outstanding     Life        Price       Exercisable    Price
------------------- ------------ ----------- -----------  ------------ -----------
<S>                 <C>          <C>         <C>          <C>          <C>
  $ 0.04 - $ 1.50       860,705        7.88     $0.9050       860,705     $0.9053
  $ 2.00 - $ 7.00       650,314        8.48     $3.2300       650,314     $3.2298
  $ 7.00 - $12.75       977,729        9.27    $11.6700       977,729    $11.6749
  $17.50 - $34.25       721,150        9.71    $27.7450       588,650    $29.5587
  $34.63 - $34.63        16,626        9.91    $34.6250        16,626    $34.6250
------------------- ------------ ----------- -----------  ------------ -----------
  $  .04 - $34.63     3,226,524        8.84    $10.8096     3,094,024    $10.4297
=================== ============ =========== ===========  ============ ===========


The preceding table includes options outstanding  under the 1991 Employee, 1995
Outside Directors Stock  Option and the 1997 Plans as well as those options 
assumed in the acquisition of ICC  (See Note 3).

        As of December 31, 1997, the Company has reserved  4,751,653 of common
stock for future issuance upon the  exercise of currently outstanding stock
options.

10. THE VANTIVE CORPORATION 401(k) PLAN:

        During 1993, the Company adopted the Vantive  Corporation 401(k) Plan
(the "401(k) Plan").  All  employees who are 21 years of age or older are 
entitled to participate on their first day of  employment.  Under the 401(k)
Plan, eligible employees  are entitled to make tax-deferred contributions and 
the Company may, at its discretion, make matching or  discretionary
contributions to the 401(k) Plan.  For  the years ended December 31, 1997,
1996 and 1995, the  Company made no matching or discretionary  contributions.

11. INCOME TAXES:

The Company has accounted for income taxes pursuant  to Statement of Financial
Accounting Standards No.  109  (SFAS No.  109), "Accounting for Income Taxes,"
since  its inception.  SFAS No.  109 provides for an asset and  liability
approach to accounting for income taxes under  which deferred income taxes are
provided based upon  enacted tax laws and rates applicable to the periods in 
which taxes become payable.  The provision for income  taxes consists of the
following (in thousands):

                                                           December 31, 
                                            --------------------------------
                                               1997       1996       1995
                                            ---------- ---------- ----------
     Current:
             Federal   . . . . .              $10,075     $3,729       $133
             State   . . . . . .                2,135        748         99
             Foreign   . . . . .                   98        197         -- 
                                            ---------- ---------- ----------
                                              $12,308     $4,674       $232
                                            ========== ========== ==========
     Deferred:
             Federal   . . . . .               (3,004)   $    --    $    -- 
             State   . . . . . .               (1,175)        --         -- 
             Foreign   . . . . .                  179         --         -- 
                                            ---------- ---------- ----------
                                              ($4,000)   $    --    $    -- 

    Total Provision:                          ($8,308)    $4,674       $232
                                            ========== ========== ==========

The provision for income taxes is net of the  benefit of a net operating loss
carryforwards of  $430,000 and $2,300,000 for the years ended  December 31,
1997 and 1996, respectively.

    The provision for income taxes was based upon income before taxes as
follows (in thousands):

                                                           December 31, 
                                            --------------------------------
                                               1997       1996       1995
                                            ---------- ---------- ----------
           Domestic  . . . . . . .               $749    $15,495     $2,934
           Foreign . . . . . . . .                601         84       (659)
                                            ---------- ---------- ----------
                Total  . . . . . .             $1,350    $15,579     $2,275
                                            ========== ========== ==========

         The provision for income taxes differs from the statutory U.S. federal
income tax rate due to the following:

                                                           December 31, 
                                            --------------------------------
                                               1997       1996       1995
                                            ---------- ---------- ----------
Provision at U.S. statutory rate . . . . . .    35.00%     35.00%     35.00%
State income taxes, net of federal benefit .     5.59       5.47       1.45
Change in valuation allowance  . . . . . . .   (55.81)     (8.42)    (32.27)
Acquired in-process research and development   634.86         --         -- 
Other  . . . . . . . . . . . . . . . . . .      (4.23)     (2.05)      5.82
                                            ---------- ---------- ----------
                                               615.41%     30.00%     10.00%
                                            ========== ========== ==========

         The components of the net deferred tax assets are as follows (in
thousands):
                                                            December 31,
                                                       ---------------------
                                                          1997       1996
                                                       ---------- ----------
     Deferred tax assets:
         Net operating loss carryforwards  .                $157       $224
         Capitalized start-up costs  . . . .                  --         28
         Accruals not currently deductible .               3,196      1,239
         Other   . . . . . . . . . . . . . .               1,198       (186)
                                                       ---------- ----------
                                                           4,551      1,305
         Valuation allowance   . . . . . . .                  --       (754)
                                                       ---------- ----------
              Net deferred tax asset . . . .              $4,551       $551
                                                       ========== ==========
        As of December 31, 1997, the Company had net  operating loss
carryforwards of approximately  $451,000.  These net operating loss
carryforwards  expire in various periods from 2000 to 2012.  The net  deferred
tax asset is included as a component of  prepaid expenses and other current
assets on the  accompanying balance sheet.      

12. RECENT ACCOUNTING PRONOUNCEMENTS:

         In June 1997, the FASB issued SFAS No. 130,  "Reporting Comprehensive
Income," which establishes  standards for reporting and display of
comprehensive  income and its components (revenue, expenses, gains  and
losses) in a full set of general-purpose financial  statements.  The Company
will adopt SFAS No. 130 in  its calendar year 1998.  Management believes the 
adoption of SFAS No. 130 will not have a material  effect on its consolidated
financial statements.  

        In June 1997, the FASB issued SFAS No. 131,  "Disclosure about
Segments of an Enterprise and  Related Information," which changes the way
public  companies report information about operating segments.   SFAS No. 131,
which is based on the management  approach to segment reporting, establishes 
requirements to report entity-wide disclosures about  products and services,
major customers, and the  material countries in which the entity holds assets 
and reports revenue.  The SFAS requires limited  segment data on a quarterly
basis.  The Company will  adopt SFAS No. 131 in the first quarter in the 
calendar year 1998.  Management believes the adoption  of SFAS No. 131 will
not have a material effect on its  consolidated financial statements.

        In October 1997, the American Institute of  Certified Public
Accountants issued Statement of  Position (SOP) 97-2, "Software Revenue
Recognition,"  which provides guidance on applying generally accepted 
accounting principles in recognizing revenue on  software transactions.  The
Company will adopt SOP 97- 2 in the calendar year 1998.  The Company
anticipates  that SOP 97-2 will not have a material impact on its 
consolidated financial statements.  

<PAGE>

                                   SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) 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.


                                       The Vantive Corporation
                                       (Registrant)





                                       /s/ Kathleen A. Murphy
                                       --------------------------------------
                                       Kathleen A. Murphy
                                       Chief Financial Officer (Principal 
                                       Financial Officer)


                                       Date:  March 24, 1998

<PAGE>
POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person  whose signature appears
below constitutes and appoints  John R. Luongo and/or Kathleen A. Murphy as
his or her  attorney-in-fact, with the power of substitution, for  him or her
in any and all capacities, to sign any  amendments to this Report on Form 10-K
and to file  same, with exhibits thereto and other documents in  connection
therewith, with the Securities and Exchange  Commission.


SIGNATURES

Pursuant to the requirements of the Securities  Exchange Act of 1934, this
report has been signed  below on March 24, 1998 by the following persons on 
behalf of the registrant and in the capacities and on  the date indicated.

       Signature                                        Title
       ---------                                        -----
/s/ John R. Luongo                   President, Chief Executive Officer and
--------------------------------     Director (Principal Executive Officer)
   (John R. Luongo)                                 


/s/ Kathleen A. Murphy               Vice President, Finance and Administration,
--------------------------------     Chief Financial Officer (Principal
   (Kathleen A. Murphy)              Financial Officer)               


/s/ Michael M. Loo                   Vice President, Finance (Principal
--------------------------------     Accounting Officer)
   (Michael M. Loo)                                 


/s/ Roger J. Sippl                   Chairman of the Board of Directors
--------------------------------
   (Roger J. Sippl)

/s/ Aneel Bhusri                     Director
--------------------------------
   (Aneel Bhusri)

/s/ William H. Davidow               Director
--------------------------------
   (William H. Davidow)

/s/ Kevin G. Hall                    Director
--------------------------------
   (Kevin G. Hall)

/s/ Raymond L. Ocampo Jr.             Director
--------------------------------
   (Raymond L. Ocampo Jr.)

/s/ Peter A. Roshko                  Director
--------------------------------
   (Peter A. Roshko)
<PAGE>





Item 6:  Exhibits and Reports on Form 8-k
           A.  Exhibits

    *3.1    Form of Agreement and Plan of Merger between The Vantive
            Corporation, a California corporation, and The Vantive
            Corporation, a Delaware corporation.
    *3.2    Bylaws.
    =4.1    Declaration of Registration Rights made on August 31, 1997  by the
            Company for the benefit of the holders of Common Stock of Innovative
            Computer Concepts, Inc.
   *10.1    Form of Indemnity Agreement for officers and directors.
   *10.2    1991 Stock Option Plan, as amended.
   *10.3    1995 Outside Directors Stock Option Plan.
   *10.4    1995 Employee Stock Purchase Plan.
   *10.5    Offer Letter dated May 21, 1993 between the Company and John R.
            Luongo.
   *10.6    Offer Letter dated April 6, 1995 between the Company and John
            M. Jack.
  *+10.7    Value Added Reseller License Agreement dated October 5, 1993 by
            and between Inference Corporation and the Company.
  *+10.8    Basicscript License Agreement dated October 4, 1994 by and
            between Henneberry Hill Technologies Corporation doing business
            as Summit Software Company and the Company.
  *+10.9    International VAR Agreement dated March 26, 1992 between Oracle
            Corporation and the Company, as amended.
  *10.9.1   International VAR Agreement dated June 28, 1996 between Oracle
            Corporation and the Company as amended.
  *+10.10   Value Added Remarketer Agreement dated December 20, 1991
            between Sybase, Inc. and the Company, as amended.
   *10.11   Security and Loan Agreement dated May 12, 1995 between the
            Company and Imperial Bank.
  *+10.12   Application Bridge API VAR License Agreement dated January 22,
            1993 between the Company and Prospect Software, Inc.
  *+10.13   Compensation Letter dated May 10, 1995 between the Company and
            John R. Luongo.
  *+10.14   Compensation Letter dated May 10, 1995 between the Company and
            Steven M. Goldsworthy.
    10.15   Lease Agreement dated January 13, 1995 between John Arrillaga,
            Trustee, or his Successor Trustee, UTA dated July 20, 1977
            (John Arrillaga Separate Property Trust) as amended, and
            Richard T. Peery, Trustee, or his Successor Trustee, UTA dated
            July 20, 1977 (Richard T. Peery Separate Property Trust) as
            amended, and the Company.
   #10.16   Lease Agreement dated September 4, 1996 between John Arrillaga,
            Trustee, or his Successor Trustee, UTA dated July 20, 1977
            (Arrillaga Family Trust) as amended, and Richard T. Peery,
            Trustee, or his Successor Trustee, UTA dated July 20, 1977
            (Richard T. Peery Separate Property Trust) as amended, and the
            Company.
  **10.17   Agreement and Plan of Merger dated August 13, 1997 by and among The
            Vantive Corporation, Igloo Acquisition Corporation and Innovative
            Computer Concepts, Inc. as amended
    21.1    List of Subsidiaries.
    23.1    Consent of Arthur Andersen LLP, Independent Public Accountants.
    24.1    Power of Attorney.
    27.1    Financial Summary Table.



----------------


*     Previously filed in the Company's Registration  Statement (No.  33-94244),
      declared effective on  August 14, 1995.

+     Confidential Treatment has been granted for  portions of this exhibit.

#     Previously filed in the Report on Form 10-K filed  on March 31, 1997.   

**    Previously filed in the Company's Report on Form 8- K filed on September
      26, 1997 and on Form 8-K/A  filed on November 4, 1997.

=     Incorporated by reference from the Company's  Registration Statement (No.
      333-36547), declared  effective on November 4, 1997.

<PAGE>
                                  EXHIBIT 21.1

                            THE VANTIVE CORPORATION


                              LIST OF SUBSIDIARIES


                                          Jurisdiction of            Ownership
      Name                                Incorporation             Percentage                   
--------------------------------------   -----------------           ----------
Vantive Australia PTY Limited                Australia                  100%

Vantive B.V.                                 The Netherlands            100%

Vantive Canada PTE Ltd.                      Canada                     100%

Vantive France, SARL                         France                     100%

Vantive Germany, GmbH                        Germany                    100%

Vantive Singapore, Inc.                      Singapore                  100%

Vantive UK Limited                           United Kingdom             100%

Innovative Computer Concepts, Inc.           United States              100%
<PAGE>


EXHIBIT 23.1

        CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation of 
our report included in this Form 10-K, into the Company's previously filed 
Registration Statement File No. 333-960 on Form S-8.  


ARTHUR ANDERSEN LLP


San Jose, California

March 23, 1998




<PAGE>




                                   SCHEDULE II
                    THE VANTIVE CORPORATION AND SUBSIDIARIES
                       VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)

</TABLE>
<TABLE> 
<CAPTION> 
                                              Amounts
                                Balance at   Charged to                 Balance
                                 Beginning    Profit                    at end
                                  of Year    and loss      Deductions   of Year
                                ----------- ------------- ----------- ---------
<S>                             <C>         <C>           <C>         <C>
Allowance for doubtful accounts

Year ended December 31, 1995         $  --          $325       $  --      $325

Year ended December 31, 1996          $325          $455       $  --      $780

Year ended December 31, 1997          $780        $1,040       $  --    $1,820

</TABLE>
<PAGE>