SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                  FORM 10-K

                       FOR ANNUAL AND TRANSITION REPORTS
                    PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
(Mark One)
x     ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF  THE
      SECURITIES EXCHANGE ACT OF 1934
      For the fiscal year ended December 31, 1997.
                                      OR
o     TRANSITION  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
      For the transition period from __________ to __________

                       Commission File Number:   0-25590

                           Datastream Systems, Inc.
            (Exact name of registrant as specified in its charter)

      Delaware                                    57-0813674               _
(State or other jurisdiction of         (I.R.S. Employer Identification No.)
 incorporation or organization)

50 Datastream Plaza, Greenville, South Carolina   29605                    _
(Address of principal executive offices)         (Zip Code)

    Registrant's telephone number, including area code: (864)422-5001
    Securities registered pursuant to Section 12(b) of the Act: None
          Securities registered pursuant to Section 12(g) of the Act:
                         Common Stock, $.01 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 is not contained  herein,  and will not be
contained,  to the best of the  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.  Yes __ No x

   Aggregate  market  value of the voting  stock held by  non-affiliates
of the Registrant as of March 20, 1998:  $302,339,223

   Number of shares of Common Stock outstanding as of March 20, 1998:
18,981,777

                      DOCUMENTS INCORPORATED BY REFERENCE

   Portions of the  definitive  Proxy  Statement of Datastream  Systems,
Inc. for its Annual  Meeting of  Stockholders  scheduled to be held June
12, 1998 are  incorporated  by  reference  into Part III of this Report.
Other  than  those  portions  specifically   incorporated  by  reference
herein,  the Proxy  Statement  for the Annual  Meeting  of  Stockholders
scheduled  to be held on June 12,  1998  shall not be deemed to be filed
as part of this Report.

<PAGE>

                                  PART I


      "Safe Harbor"  Statement under the Private  Securities  Litigation
Reform Act of 1995:  Certain  of the  statements  contained  in the body
of this Report are  forward-looking  statements  (rather than historical
facts)  that are  subject to risks and  uncertainties  that could  cause
actual  results  to  differ  materially  from  those  described  in  the
forward-looking  statements.  In the  preparation of this Report,  where
such  forward-looking  statements  appear,  the  Company  has  sought to
accompany  such  statements  with   meaningful   cautionary   statements
identifying  important  factors  that  could  cause  actual  results  to
differ   materially   from  those   described  in  the   forward-looking
statements.  An  additional  statement  made  pursuant  to  the  Private
Securities  Litigation  Reform Act of 1995 and summarizing the principal
risks and uncertainties  inherent in the Company's  business is included
herein  under the  caption  "Management's  Discussion  and  Analysis  of
Financial   Condition   and  Results  of   Operations   --  Safe  Harbor
Statement".  Readers  of  this  Report  are  encouraged  to  read  these
cautionary statements carefully.

Item 1. Business.

    As used herein,  except as otherwise  indicated by the context,  the
term  "Datastream"  is used to refer  to the  historical  operations  of
Datastream  Systems,  Inc.  and its  subsidiaries  other than SQL Group,
B.V.  and its  respective  subsidiaries,  and the term  "SQL" is used to
refer  to  the  historical   operations  of  SQL  Group,   B.V.  and  it
subsidiaries.  The  term  "Company"  is used  to  refer  to the  current
operations of the combined  entity of  Datastream  and SQL following the
December  31,  1996  acquisition  of  SQL  by  Datastream.  Because  the
acquisition  of SQL  was  completed  on the  last  day of  1996  and was
accounted for as a purchase,  SQL's  results of operations  are included
with those of  Datastream's  beginning  January  1,  1997.  Accordingly,
operations  data  provided  for SQL  prior to 1997 is given  solely  for
providing  historical  perspective about SQL prior to its acquisition by
Datastream.

    Datastream  develops,  markets,  sells and supports personal desktop
computer,  file/server  and  client/server  enterprise  software for the
industrial  automation  market.  Effective use of Datastream's  software
saves  costs  by  reducing   downtime   associated  with  key  equipment
failure,  optimizing  spare  parts  inventories,   improving  purchasing
efficiencies  and  reducing  overall  maintenance  costs.  In 1997,  the
Company  derived over 99% of its software unit sales from  Windows-based
products,  including  MP2  Enterprise  v5.0,  which  was  awarded  Plant
Engineering  magazine's  1997 "Gold  Product of the Year" in the General
and  Maintenance  Software  category.  The  Company  is  an  established
leader in the market for "computerized  maintenance  management systems"
("CMMS")  based on unit sales,  having sold almost  36,000 CMMS  systems
(includes  only 1997 unit sales by SQL).  The  Company's  strategy is to
maintain  its  position  in the CMMS  market by  providing  feature-rich
software  solutions to the  maintenance,  repair and operations  ("MRO")
industry  and being a  value-price  leader in each area of the market in
which it competes.

    Datastream  was  incorporated  as a South  Carolina  corporation  in
February 1986 upon  consummation  of the  acquisition  of the assets and
liabilities  of the  Datastream  Systems  Division  of a  subsidiary  of
Wisconsin  Power  &  Light.  Datastream  reincorporated  as  a  Delaware
corporation  in  January  1995.   Datastream's   executive  offices  are
located at 50 Datastream  Plaza,  Greenville,  South Carolina 29605, and
its telephone number is (864) 422-5001.

    On December 31,  1996,  Datastream  acquired all of the  outstanding
capital  stock of SQL for a purchase  price of $34  million,  consisting
of $17 million in cash,  $14 million in  Datastream  common stock issued
pursuant  to  Regulation  S,  $3  million  in  escrowed  stock,  and the
assumption  of  outstanding  liabilities.  SQL  (which  has  offices  in
Rotterdam,  The Netherlands;  Slough,  England;  and Paris and Grenoble,
France) develops,  markets,  sells and supports high-end,  client/server
Enterprise Asset Management  Software ("EAMS") for sale  internationally
and  domestically.  SQL's  products are used in  businesses,  government
agencies  and  other   organizations   to  assist   these   entities  in
maintaining  high-value  capital assets such as  facilities,  plants and
manufacturing   production   facilities.   Like  Datastream's  products,
SQL's  products  are designed to enable  customers to reduce  down-time,
control  maintenance  expenses,  cut spare parts  inventories and costs,
improve  purchasing  efficiency and more effectively  deploy  productive
assets, personnel and other resources.

    SQL was  incorporated  as a Dutch  corporation  in February  1985 to
sell a  portfolio  of  maintenance  management  software  products.  SQL
currently  derives  over  75% of its  revenues  from  sales  of its  MP5
(formerly  R5  CAMMS)  product.  In 1988,  SQL  merged  with an  English
subsidiary  of the  Kvaerner  Group.  During  1994,  SQL  acquired  a US
subsidiary  of Hartford  Steam Boiler,  and during 1996,  SQL acquired a
French  partner from  Sirlog,  S.A., a leader in the French EAMS market.
SQL's executive  offices are located at  Groothandelsgebouw  - Ingang E,
Conradstraat 18,  Rotterdam,  The Netherlands,  and its telephone number
is 31 10 206 4700.

The company is currently negotiating and  planning  to  close during the
first half of the second  quarter of 1998  on the purchase of a European
based  CMMS  software  producer.  If  the  Company  successfully  closes
this  acquisition,  it  plans  to file a report on  Form 8-K  disclosing
further details shortly thereafter.


Industry

    The   computerization   of   maintenance   and   repair   tasks  has
historically  lagged  behind  the  computerization  of  other  corporate
functions  such as production and finance.  Companies have  historically
neglected the  computerization  of the maintenance and repair  functions
because  of  the  low   priority   placed  on   preventive   maintenance
management  and the  relative  lack of  knowledge  about and  experience
with  the   products   and  services   available.   Historically,   most
companies  adopted  manual methods of monitoring  their capital  assets,
maintaining  parts   inventories,   scheduling   maintenance  tasks  and
ordering repair services.

    In  recent  years,  industrial  corporations  have been  faced  with
issues of  increasing  competitiveness,  often on a global  basis.  They
have responded by seeking new ways to reduce costs,  improve  efficiency
and increase capacity  utilization.  Structural  changes  implemented by
these  companies  have included  placing  emphasis on core  competencies
and  restructuring,  downsizing or  eliminating  operations  that do not
contribute   to  financial   performance.   As  a  result,   departments
responsible  for  maintenance and repair tasks have been asked to ensure
equipment   performance,   uptime  and  availability  with  increasingly
diminished    resources.    This   pressure   has   forced   maintenance
departments  to look for new ways to  manage  these  activities  such as
more  effective   scheduling  of  equipment   downtime  and  maintenance
personnel   and   controlling   inventory   and  other  costs.   Today's
sophisticated  maintenance  departments also seek to employ  statistical
analysis techniques such as statistical  preventive  maintenance.  While
the use of computers in maintenance  departments has lagged,  this trend
is being  reversed as  companies  emphasize  cost  reduction to increase
global  competitiveness  and as  reductions  in prices and  increases in
computing power of personal  computers have lead to a  proliferation  of
these tools in industry.

    The  term  "computerized   maintenance  management  systems"  (CMMS)
generally  includes  any  computer  software   application  designed  to
track,  monitor and  maintain  histories  on high value  capital  assets
such as  production  equipment,  spare  parts  inventories,  plants  and
facilities  and to compare  and  contrast  key asset  performance  data.
Manual methods  represent an inefficient  way to perform data collection
and   statistical    analysis.    Catastrophic    equipment    failures,
sub-optimal equipment  performance and unnecessary  "preventive repairs"
are common  occurrences  at facilities  that do not employ some means of
managing  maintenance  and  repair  activities.  The advent of CMMS has,
however,  enabled  corporations to increase  efficiency and reduce costs
by,  among  other  things,  reducing  the  probability  of  catastrophic
failures,  reducing  unscheduled  downtime,  eliminating  costly  excess
repair  parts   inventories  and  allowing   maintenance   tasks  to  be
scheduled   more   effectively   to  permit   maximum   utilization   of
resources.  The  resulting  incremental  gains in  efficiency  generally
translate  directly into lower  operating  costs.  The term  "enterprise
asset  management  systems" (EAMS)  generally  refers to that segment of
the CMMS  market  that is  oriented  towards  customers  with very large
investments in high cost plants or facilities  and/or where  maintenance
is  a   mission-critical   discipline.   Companies   that   deploy  EAMS
solutions  tend  to  be  large,  multinational  organizations  having  a
number of geographically  dispersed  locations.  EAMS  installations are
differentiated  by  enterprise  scaled  features  such as a large fourth
generation  relational  database,   global  asset  tracking  capability,
configurable   workflow,   multiple  concurrent   language   capability,
centralized  inventory  control  and  coordinated  worldwide  purchasing
functionality.    Enterprises    deploying   EAMS   solutions   seek   a
combination  of  technology,  database  capability and features that are
able to be implemented  over  corporate-wide  area  networks,  corporate
intranets, or satellite-based communications systems.

    A  1993  benchmarking   study  published  by  A.T.   Kearney,   Inc.
indicates  that  maintenance  costs  range from  approximately  1% to as
much  as  10% or  more  of an  organization's  sales,  depending  on the
industry.  Datastream  believes  its systems  can reduce  these costs by
10% to 20%.  According  to several  industry  research  firms  including
International   Data   Corporation   (IDC)   and   Automation   Research
Corporation,  the maintenance  management  market is at the $600 million
mark today and is  expected  to exceed $1 billion by the year 2000.  The
market   spans   Fortune   1000   corporations,   process  and  discrete
manufacturers,  government agencies,  universities,  hospitals and other
organizations  which maintain  high-value capital assets such as plants,
facilities,  and production  equipment.  The Gartner Group has projected
a $1.0 billion  global market for CMMS software and related  services by
the year  2000  and a $1.4  billion  market  by the  year  2002.  A 1997
study by Hancock  Information  Group  indicates that only  approximately
50% of corporate and  governmental  users surveyed utilize CMMS packages
to  track  maintenance  functions,   and  that  almost  30%  were  still
performing  these tasks  either  manually or on  spreadsheets.  Although
these   figures   are   based  on  a  random   sample   of  only   1,550
companies/governmental  agencies,  management  believes they reflect the
substantial potential for future growth in the use of CMMS.

    The market for  CMMS/EAMS  software is relatively  fragmented,  with
an  estimated  200  vendors  competing  for market  share.  Datastream's
sales efforts have  historically  been  concentrated at the lower end of
the  CMMS  market(in  which  a  typical   transaction  size,   including
software and customization,  integration,  training and support services
range  from  $1,000  to  $10,000),   and  the  Company  could  encounter
competition  in  this  segment  from  vendors  that  have  traditionally
provided  software for mainframes and  minicomputers and are now seeking
to  convert  their  systems  for  use  in  the  personal  computer  ("PC
network")  client/server  environment.  The  acquisition  of SQL enables
the  Company to begin to  compete  in the  higher  end of the  CMMS/EAMS
market   (in   which   transaction   sizes,   including   software   and
customization,  integration and support  services,  could range anywhere
from  approximately  $100,000 to several  million  dollars  depending on
the size of the customer).

    Certain competitors have greater financial,  marketing,  service and
support and technical  resources than the Company.  In addition,  as the
PC network  client/server  market  continues to develop,  companies with
significantly  greater  resources than the Company may seek to introduce
products  specifically  designed to provide  CMMS/EAMS  solutions  on PC
network  client/server  systems at lower  prices,  or to form  strategic
alliances with competitors of the Company. See "--Competition."


<PAGE>
Company Strategy

    The Company's  objective is to leverage its  leadership  position in
the CMMS/EAMS  market by providing  feature-rich  software  solutions to
the MRO industry and by being a  value-price  leader in each area of the
market in which it  competes.  To achieve  this  objective,  the Company
intends to continue to pursue the following strategies:

    Enhance  product  offerings.  The  foundation of the Company's  past
success has been the  innovative  quality of its product  offerings  and
the value the  Company's  products  provided to its  customers.  In each
of the past five  years,  the  Company  was  awarded  Plant  Engineering
magazine's  Software  "Gold  Product  of the  Year"  for  its  products-
SideArm  for  Windows,   MP2  for  Windows,   the  Personal  Maintenance
Assistant,  MaintainIt  Pro,  and  MP2  Enterprise  on SQL  Server  5.0,
respectively.  MP2  Enterprise  on SQL  Server  5.0  includes  a failure
analysis  tree,   drag-and-drop   work  order   scheduling,   multi-site
inventory  tracking,  and  enhanced  performance  due to a  thin  client
architecture.  Unlike many software companies,  Datastream provides free
updates  of Company  products  to  customers  that  subscribe  to annual
maintenance  and support  contracts.  During 1997, the Company  released
final  versions  of  MP2  Professional  and  Enterprise,   Client/Server
products  that  utilize the  Microsoft  SQL Server  database  and also a
version for Oracle(TM)7; translated v4.6 into Portuguese (beta release);
released  its MP2 for SQL  products  in  four  European  languages  (two
versions  in  beta);  released  MaintainIt  Pro  in an  additional  four
European  languages;   introduced  RequestLink,  an  e-mail  work  order
request  system  compatible  with  all  platforms,   including  internet
protocols;  released  MP2  Explorer,  an add-on to MP2 that allows users
to  tour  a  facility  graphically;   introduced  an  Oracle  Financials
interface v1.0, an add-on that  facilitates  data  interchanges  between
MP2 Enterprise for Oracle databases with the Oracle  Applications  suite
of products;  and released  beta  versions of PagerLink  and WebLink,  a
pager  link  that  notifies  maintenance  workers  by  pager of new work
orders  and  a  system   add-on  that  extends   basic  MP2   Enterprise
functionality   to  users  with   intranet/internet   access  through  a
standard  internet  browser without the need for  proprietary  software,
respectively.

    Utilize its  cost-effective  telesales  program to  increase  market
share.  Given the large and relatively  untapped nature of the Company's
potential  market,  Datastream  seeks to gain market  share  through its
cost-effective  telesales  efforts.  The relatively  inexpensive  nature
of the Company's  lower end systems  (which sell for an average of $200,
$3,200  and  $12,200  for   MaintainIt,   MP2   Professional,   and  MP2
Enterprise,  respectively) makes Datastream's  telesales approach a very
cost-effective  means of  accessing  the  Company's  target  market  and
achieving  gains in market  share.  The Company seeks to use its initial
sale as a platform  from which to sell the  customer (or  affiliates  of
the   customer)   additional   products  and   services.   During  1996,
Datastream  expanded  its sales  efforts  through the addition of both a
low-end  "channel"  sales  force  selling to  catalogue,  retail and OEM
customers,  and  a  geographically-dispersed,   regional  outside  sales
force.  During 1997,  the Company also  increased  the size and scope of
its  third-party  distributor  network in those countries where the size
of the local  market did not  warrant a direct  investment.  The Company
is  continuing  to  aggressively  add sales  personnel  to increase  the
scope of its channel sales efforts,  telesales  efforts,  direct selling
efforts and distributor network, both domestically and internationally.

    Leverage  existing  customer  base.  The  Company  plans to generate
additional  software sales and professional  services  revenues from its
large  installed  base of  customers.  Certain  customers  may  purchase
additional  Datastream  software and  professional  services  because of
internal  business  growth,  growing  demands  for  uptime  and  reduced
costs,  or proven product  performance.  Many  MaintainIt  customers are
smaller   divisions  of  larger   corporations,   and  these   customers
represent an  attractive  prospect  base into which the Company can sell
a broader  enterprise  solution.  In addition,  the  Company's  customer
base  purchases  billions of dollars on MRO  purchase  orders  using the
Company's  software.  The Company  believes that an  opportunity  exists
to direct this  procurement  activity  to the  Internet in a manner that
enhances customer and shareholder value.

    Increase  professional  services,  training and support revenues. As
the  Company's  customers  migrate  to more  complex  CMMS/EAMS  systems
(particularly   client/server   systems),    management   expects   that
opportunities   will   increase  to  maximize   professional   services,
training  and  support  revenues.  The  extent to which  this  migration
will actually  occur is dependent  upon the continued  acceptance in the
marketplace  of  client/server  computing  as  a  computing  model,  the
success of the  Company's  client/server  offerings,  customer  spending
decisions  and other  factors  beyond  the  control of the  Company.  In
1997,  Datastream   substantially   increased  the  number  of  regional
training  classes it offers and more than  doubled the  personnel in its
Professional  Services  Group,  which  provides  consulting and advisory
services.   The  Company  has   continued  to  expand  its   Integration
Services  Group,  whose  mission  is to meet the  sophisticated  systems
integration  needs of  client/server  customers,  and its  Customization
Group,   which  focuses  on  establishing   industry  expertise  in  the
automation  of MRO  activities.  The  acquisition  of SQL  in  1996  has
extended  the  customer  base by giving  the  Company  access to larger,
more  sophisticated  customers.  SQL's  revenues grew by 29% during 1997
through  continued  acceptance  of its  high-end  products  and  related
professional   services.   The  Company  offers   Reliability   Centered
Maintenance  (RCM)  services  and is a  licensee  of Aladon  Reliability
Centered  Maintenance,   a   functionality-based   maintenance  approach
developed   by   the   airline    industry   in   the   early    1960's.
Reliability-centered   maintenance   is  most   useful  in   maintenance
situations  where the  consequences  of  catastrophic  failure are high,
such as airline  crashes,  fuel tank farm  fires,  etc.  RCM  focuses on
testing,   inspection  and  potentially   redundant  systems  to  ensure
failure risk is  minimized.  The Company  emphasizes  the  importance of
product support  concepts,  which provide a recurring revenue stream and
continued long-term relationships with customers.

    Penetrate   international   markets.   International  sales  of  the
Company's  products  increased  to 36.0% of revenue for 1997 (from 13.4%
of 1996  revenues),  primarily  as a result of the  acquisition  of SQL.
Management  believes that  substantial  international  demand exists for
high-quality  software  products with industrial  applications.  To meet
this demand, the Company increased  international  sales in 1997 through
the engagement of distributors in Argentina,  Austria,  Brazil,  Canada,
Chile, China, Denmark,  Germany,  Greece, Hong Kong,  Indonesia,  Korea,
Netherlands  Antilles,  Norway,  The  Philippines,  Portugal,  Slovakia,
Spain,   Sweden,   Switzerland,   and  Venezuela  to  complement   those
previously  engaged in  Australia,  Italy,  Puerto  Rico,  Malaysia  and
South  Africa.  During  1997,  the  Company  introduced  several  of its
products  in nine new  languages,  giving  it  access  to  multiple  new
markets in Europe and Latin  America.  The  Company  has also  partnered
with Daewoo  Information  Systems,  a subsidiary of Daewoo  Group,  in a
joint   worldwide   development   and   distribution   partnership   for
computerized  maintenance  management  systems.  The  agreement  engages
Daewoo to  convert  the MP2  system  from  single  byte to  double  byte
characters  positioning  the product for  penetration  of Asian markets.
Daewoo will use the MP2 system in their plants  worldwide  and will have
the  exclusive  right to sell  Datastream  products in Korea.  Increases
in  international  sales  as  a  percentage  of  revenues  represents  a
positive   trend,   although   changes  in  the  value  of  the  foreign
currencies  from which such revenues are derived  relative to the United
States dollar could  contribute to fluctuations in Datastream's  results
of  operations  and affect its financial  position.  Gains and losses on
translation  to United  States  dollars  could  influence  the Company's
results  of  operations.   For  financial   information   regarding  the
Company's foreign and domestic operations,  see "Management's Discussion
and  Analysis  of  Financial  Condition  and  Results  of  Operations  -
Overview".

    Establish  new  strategic  alliances.  The Company seeks to leverage
its  position  as the  established  unit sales  leader in the  CMMS/EAMS
market  by  entering  into  new  strategic  relationships  with  leading
companies  in the MRO  and  software  industries,  thereby  opening  new
sales  channels  and  enhancing  its product  offerings.  The  Company's
continued  leadership  in the  CMMS/EAMS  market is primarily a function
of continued customer  acceptance of Datastream's  products,  as well as
the  Company's   success  in  establishing  and  maintaining   effective
strategic   relationships.   In  1994,   the  Company   entered  into  a
cooperative  relationship with W.W. Grainger,  Inc.  ("Grainger"),  a $3
billion  nationwide  distributor of industrial  equipment and components
sold  through  more  than  1,400  sales   representatives   and  account
specialists.   This  agreement  gives   Datastream's   customers  direct
access  to  Grainger's  Electronic  Catalog  of  over  90,000  items  of
industrial  and  commercial  equipment and supplies for their MRO needs.
This  relationship also provides  Datastream with an additional  channel
for selling its products to Grainger's  customer  base.  Direct sales to
Grainger during 1997 were  approximately  $440,000 and sales  influenced
by  Grainger  were  almost  $2  million.  In 1996,  Datastream  signed a
distribution  agreement  with J.  Blackwood & Sons,  Ltd. a $420 million
distributor   of  industrial   equipment  and   components   located  in
Australia.  These  relationships  and alliances  provide  additional and
expanded  channels of  distribution  for sales of  Datastream  products.
In  1997,   Datastream   entered  into  an  agreement  with   Datasphere
Technologies,  Inc.  to  purchase  for  resale,  market  and  distribute
copies  of  Datasphere's  software,  a  package  that  allows  users  to
visually  navigate a  facility,  using CAD  diagrams,  and drill down to
deeper layers of detail.  Datastream  granted  Datasphere similar rights
to purchase for resale,  market and  distribute  copies of  Datastream's
software.  The  agreement  provides for the sharing of certain  revenues
when  a  customer  buys  both   Datastream  and   Datasphere   software.
Datastream  is  marketing  the  Datasphere  software  under the name MP2
Explorer.  In 1997,  Datastream  also  entered into a  partnership  with
Daewoo  Information  Systems that will give Datastream  access to Korean
markets  and  engages  Daewoo  to  convert  Datastream's  software  from
single to double byte  characters,  thereby  enabling the translation of
the software into Asian languages,  which management  believes will help
to expand  the  market  for  Datastream  products.  In 1997,  Datastream
obtained   certification  from  the  Oracle  Corporation  that  its  MP5
product   integrates  seamlessly  with  the  Oracle(R) Financials  v10.7
product.  This is an important  step in further  integrating  Datastream
with leading  Enterprise  Resource Planning (ERP) providers.  Datastream
has  also   achieved   Microsoft   Office   and   Microsoft   BackOffice
certification  for  its MP2  Enterprise  v5.0  SQL  Server  product  and
became a  Microsoft  Certified  Solutions  Provider,  strengthening  its
links  to the  Microsoft  operating  system.  In 1997,  Datastream  also
signed  a  strategic  alliance  agreement  with  PREDICT(R),  a  leading
provider of  diagnostic  tools and services for  predictive  maintenance
tasks.   The forthcoming   release  of  Voyager(TM), PREDICT's   modular
software  for  monitoring  equipment  condition,  will contain a copy of
Datastream's  MaintainIt  software.  The combined package will integrate
the  detection of machine wear with the  scheduling of  maintenance  and
cost  analysis.  The  Company is also a licensee  of Aladon  Reliability
Centered Maintenance (RCM), a  functionality-based  maintenance approach
developed by the airline industry in the early 1960's.

Products

    The  Company  develops,   markets,  sells  and  supports  innovative
personal  computer  software  for  the  industrial   automation  market.
Datastream's  software products assist customers in managing  high-value
plants,  facilities  and production  equipment for increased  efficiency
and  productivity.   The  Company's  products  are  designed  to  enable
customers to reduce downtime,  control maintenance  expenses,  cut spare
parts  inventories  and costs,  improve  purchasing  efficiency and more
effectively  deploy  productive  assets,  personnel and other resources.
In 1997,  the Company  derived  approximately  99% of its software  unit
sales from its Windows-based products,  MaintainIt,  MaintainIt Pro, MP2
Professional,   MP2  Enterprise  and  MP5.   Datastream   products  have
garnered Plant  Engineering  magazine's "Gold Product of the Year" award
in  the  Software   category  in  each  of  the  last  five  years:  MP2
Enterprise on SQL server 5.0 in 1997,  MaintainIt Pro in 1996,  Personal
Maintenance  Assistant in 1995,  MP2 for Windows in 1994 and SideArm for
Windows in 1993.

    In 1996,  through the  acquisition  of SQL, the Company  added SQL's
Oracle-based  R5 CAMMS  product to its  product  mix,  renaming  it MP5.
Management  believes  that the  addition of this  product  will give the
Company  increased  opportunities  to penetrate into the high-end of the
CMMS/EAMS market.

    The following chart describes the evolution of the Company's
CMMS/EAMS systems:

                                                            Initial
    Package/Platform               Description            Release Date
    ----------------               -----------            ------------
MP2(R)(DOS).............. Predecessor of MP2 for Windows.   June 1989

SideArm(R) (DOS)......... Predecessor of SideArm for      December 1990
                          Windows.

SideArm(R) for Windows(R) Microsoft Windows operating    September 1993
                          environment.

MP2(R) for Windows
 (Now MP2 Professional).. Microsoft Windows operating       April 1994
                          environment - file server
                          based.

MaintainIt(R) for Windows Microsoft Windows operating      August 1995
                          environment - entry level
                          package.

Datastream Personal
Maintenance Assistant(R)
on Apple(R) Newton....... Newton operating system          August 1995
                          environment.

MP2 for Windows
  (Now MP2 Professional). Spanish language version.       September 1995
  (Spanish language)

MP2 for Windows
  (client/server)........ User-interface and              November 1995
  (Now MP2 Professional)  functionality identical to
                          MP2 for Windows. The client/
                          server version of MP2 for
                          Windows is compatible with
                          Oracle databases that reside
                          on Unix, OS/2 and DOS/Windows
                          database servers.

MP2 for Windows95
and NT................... Microsoft Windows95 and NT 32     June 1996
  (Now MP2 Professional)  bit operating environment;
                          provides the same functions
                          as MP2 for Windows 16 bit
                          operating system.

<PAGE>
                                                            Initial
    Package/Platform            Description               Release Date
    ----------------            -----------               ------------
MP2 for Windows
  (Now MP2 Professional). German language version.        September 1996
  (German language)

MaintainIt Pro(R)........ Microsoft Windows operating     September 1996
                          environment on the
                          Microsoft Access database.

RequestLink(R)........... Internet/e-mail electronic      September 1996
                          work order request system
                          for use with Lotus cc:Mail/
                          Notes, Microsoft Mail/Exchange,
                          or Internet mail (SMTP/POP3).

MP2 for Windows Client/
Server for Microsoft
SQL Server v5.0
  (Now MP2 Professional). MP2 for Windows with enhanced    December 1996
  (Beta)                  user-interface and functionality.
                          Compatible with Microsoft SQL
                          databases that reside on Windows
                          NT database servers.

Oracle Financials 1.0
  (Beta)................. Oracle Financials interface      December 1996
                          for MP2 for Windows client/
                          server.

R5 CAMMS (Now MP5)....... High-end multi-language         December 1996(1)
                          multi-platform, double-byte
                          client/server technology.

MP2 Enterprise v5.0...... SQL Server (March 1997)          March 1997/
                          and Oracle (June 1997)            June 1997
                          versions.  Client/Server
                          environment.

MP2 Professional v5.0.... SQL Server product for           March 1997
                          client/server environment

MP2 Professional v5.0.... French version                    May 1997
                          German version (beta)             May 1997
                          Dutch version(beta)            September 1997
                          Spanish version                 December 1997

MP2 Enterprise v5.0...... French version                    May 1997
                          German version (beta)             May 1997
                          Dutch version(beta)            September 1997
                          Spanish version                December 1997

MP2 for Windows v4.6
(Portuguese language).... Portuguese language            September 1997
(beta)                    version of the
                          file/server based MP2 for
                          Windows.

MP2 Explorer............. Graphics based add-on for      October 1997(2)
(Beta)                    MP2 Enterprise v5.0.



<PAGE>
                                                              Initial
    Package/Platform           Description                  Release Date
    ----------------           -----------                  ------------
MaintainIt Pro........... Italian version                 October 1997
                          Spanish version                 October 1997
                          Danish version                  November 1997
                          Norwegian version               November 1997

MP2 Enterprise v6.0       Oracle version.                 October 1997
                          Client/Server environment

Oracle Applications
Interface v2.0
(for MP2 Oracle v6.0)...  Oracle Applications             November 1997
(Beta)                    interface for MP2
                          Enterprise v6.0
                          Client/Server.

PagerLink...............  Add-on that automatically       November 1997
(Beta)                    pages maintenance workers.

WebLink.................  Add-on allowing users to        December 1997
(Beta)                    submit work order or
                          purchase order requests
                          using a standard internet
                          browser.



                           (1)  Originally developed in 1994 by SQL,
                                which was acquired in December 1996 by
                                Datastream

                           (2)  Developed by Datasphere Technologies,
                                Inc. and marketed by Datastream under a
                                distribution agreement.

    The  following  is a more  detailed  description  of  the  Company's
primary products:

    MaintainIt and  MaintainIt  Pro for Windows.  MaintainIt for Windows
is an off-the-shelf,  entry-level  maintenance system marketed primarily
to  small  businesses  (fewer  than  20  employees)  as  an  inexpensive
alternative  to  the  Company's  other  products.   MaintainIt  provides
basic  tools for  creating  work  orders,  scheduling  repair  personnel
activities,   maintaining   equipment  records,   controlling  inventory
functions  and  generating   management   reports  and  graphs.  A  true
Windows  product,  MaintainIt  is  compatible  with  Windows  95  and is
offered in both  single-user  and  networked  versions.  MaintainIt  Pro
for  Windows  was  released  in  September  1996  and  contains  all the
features of  MaintainIt  as well as location  based  indexing,  and more
extensive  graphs and report  capabilities.  MaintainIt  Pro operates on
the  Microsoft  Access  database.  MaintainIt  Pro  is  compatible  with
Windows 95 and is offered in both single-user and networked versions.

    MP2  Professional.   MP2  Professional  is  designed  for  small  or
medium   sized   facilities.   It   is   a   full-featured,   integrated
maintenance   system   that   includes  a  flexible   security   system,
sophisticated    analysis,    reporting   and   regulatory    compliance
capabilities  and a set of precise  tools for  generating  work  orders,
tracking   equipment   histories,   managing  inventory  and  purchasing
functions,  maintaining  complete  labor records and  allocating  scarce
maintenance   resources.   It  also  offers   innovative   audit  trail,
warranty  tracking  and  statistical   predictive   maintenance  ("SPM")
features.   The  SPM  module   analyzes   process   variables   such  as
temperature,   vibration  and  electrical   current  to  measure  trends
against   established   norms.   If  the  variables   exceed   specified
tolerances or calculated  statistical  limits,  the software  alerts the
user to allow necessary  repairs to be made before equipment  failure is
experienced.  Customers  report that the SPM feature reduces  corrective
maintenance  expenses  significantly  and  increases  productivity.   In
addition,  the entire  user's manual for MP2  Professional  is available
on the user's screen through the help function.

    MP2  Professional  offers a large  number of  advanced  capabilities
not  available in  MaintainIt  or  MaintainIt  Pro.  These  capabilities
include  a  work   request   system  that  can  request  work  from  any
workstation;  a service  request module that allows the manager to track
response  times,  prioritize  service  requests and maintain  records of
requests  by tenant or  client;  advanced  inventory  tracking  features
that track  inventory by LIFO,  FIFO or weighted  average  price methods
and also  perform  "ABC"  (inventory  assessment)  and  "Economic  Order
Quantity" analyses;  exclusive  purchasing and requisition  features for
establishing  and  maintaining  pre-approved  cost thresholds to monitor
and  control  purchasing;   a  "shadowing"  feature  that  automatically
combines   separate,   but   contemporaneously    scheduled   preventive
maintenance  tasks that include the same  procedure;  and,  importantly,
access to Grainger's  Electronic  Catalog.  MP2 Professional also offers
extensive  graphic  capabilities.  A variety of optional add-on products
are also available for MP2  Professional  including (i) a Custom Toolbox
that  allows  the  user  to  transfer  data  from  MP2  Professional  to
spreadsheets   and  to  create  custom   reports  and   programs,   (ii)
customized work order and purchase order  capability,  (iii)  networking
capability,   (iv)   enhanced   OSHA   compliance   features   and   (v)
compatibility  with  barcode  technology.   The  barcode  option  allows
printing  of  labels,  entry  of  equipment  readings  and  meter  data,
receipt  of  purchased   materials,   counting  of  physical  inventory,
inventory issue and return and work order entries.

    MP2  Professional is available in 16-bit or 32-bit  versions.  It is
available  for  Paradox  and  Microsoft   SQL  Server   databases.   MP2
Professional  is  compatible  with  Windows 95 and Windows NT  operating
systems.

    In the file/server  configuration,  MP2 Professional allows multiple
users to share  data  files  through  access to a central  file  server.
Each PC  network  user  controls  all  primary  functions  at the user's
workstation, including database search and sorting functions.

    Datastream  continues to license and support the  predecessor of MP2
Professional, called MP2, for use in DOS operating environments.

    Management  believes that many of the Company's  existing  customers
and  prospects  have  either  already   adopted  or  may  adopt  in  the
foreseeable  future  a  "client/server"   computing  architecture.   The
client/server  model is recognized  as an effective  and  cost-efficient
approach  for  allowing  multiple  users to  access,  utilize  and share
large  databases.  A  typical  client/server  system  features  software
operating  on  "client"  computers--high  performance  desktop  personal
computers  using a Windows  graphical  user  interface that controls all
inquiry and command  functions--connected  through a local area  network
with  database  server  computers  that organize and manage the resident
relational  database and manage network  functions such as data storage,
printing, communications, data security and data integrity.

    The lower  cost of  increasingly  powerful  personal  computers  has
made it possible  for  smaller  organizations  to adopt a  client/server
approach to managing  their  CMMS/EAMS  tasks.  Many other factors favor
the  adoption of  client/server  solutions,  including  improvements  in
operating   systems  and   software   environments,   the   adoption  of
easy-to-use  graphical  interfaces  supported by  Microsoft  Windows and
the broader  availability of  connectivity  software that links personal
computer  "clients"  with  mainframes and  mini-computers  to protect an
organization's  investment  in  existing  host  systems.  Finally,  a PC
network  client/server  system  can be  deployed  on an  enterprise-wide
basis,  on multiple  networks,  for customers  that perform  maintenance
and repair operations at multiple locations.

    Datastream  released its  client/server  version of MP2 Professional
(version  4.6)  during the fourth  quarter  of 1995.  The  client/server
version of MP2  Professional  combines the benefits of PC servers and PC
networks with a Windows  graphical  user  interface  and SQL  relational
database server.  Client  workstations  receive data,  command and query
input from users and  forward  this input to the  database,  perform all
database  command  and  query  functions,  organize  selected  data  and
forward  data  to  the  client  for  presentation  to  the  user.  In  a
client/server  environment,  each  user  thus  has  access  to a  common
database,   enhancing   corporate  database  sharing  of  inventory  and
purchasing data, equipment performance information and work standards.

    The  client/server  version  of MP2  Professional  is  priced in the
$5,000  to  $10,000   range  and  is  believed  by   management   to  be
comparable,   in  terms  of  functionality,   with  competitive  product
offerings  typically  priced from  $40,000 to  $250,000.  The  graphical
user  interface  for  this  product  and the  application  features  are
virtually   identical  to  the  current   file/server   version  of  MP2
Professional,   although  the  client/server   version  processes  large
customer  databases  more  rapidly  than  the  file/server   version  (a
feature  that  management  expects will  enhance  customer  acceptance).
Management  believes  that many of the  Company's  existing  file/server
users may elect to adopt  client/server  technology  in the  foreseeable
future to take advantage of data integrity,  security,  data sharing and
performance  improvements.  As  this  migration  continues,   management
expects  opportunities  for expanded  revenues in the form of additional
installation, training and customization services.

    Prior to the  release  of its  first  client/server  version  of MP2
Professional  in November 1995,  the Company did not  participate in the
market   for   client/server   tools   and   applications.    Management
recognizes   that    client/server    products   are   more   expensive,
time-consuming   and   difficult  to  install  and   integrate   into  a
customer's  existing system than  counterpart  products  offered for use
in  file/server  or other  computing  paradigms  and that the  Company's
entry  into  this  market   presents   challenges  in  terms  of  market
acceptance  that  the  Company  had  not  previously  faced  in  selling
lower-priced,  easier-to-install  tools and applications.  Continuing to
expand its  presence  into the  client/server  marketplace,  the Company
also faces all of the risks  inherent in any new  product  introduction,
including business risks beyond the scope of management's control.

    The  latest  client/server   version  of  MP2  Professional  is  MP2
Professional  v5.0.  Created for the Microsoft(R)  SQL Server  database,
this  product  has a  thin  client  leaving  most  of  the  work  to the
server--  minimizing   processing  time,  ensuring  data  integrity  and
security,  and reducing network traffic.  The product features  wizards,
context  sensitive  on-line  help,  customizable  toolbars and Microsoft
BackOffice(TM) compatibility. The software offers comprehensive analysis
capabilities  for  inventory  and work  orders  including  graphing  and
customizable  reports.  A labor module  tracks labor costs by work order
and  analyses  productivity.   The  equipment  module  allows  users  to
specify  whether a piece of  equipment  is  out-of-service,  list one or
more  meters  for each  piece of  equipment  and  view or  update  meter
readings,  view a history of work orders for each  equipment  record and
create and view  equipment  relationships  with the equipment  component
view. The inventory  module  features  three  valuation  methods:  LIFO,
FIFO or weighted  average,  and caters to multiple  sites with different
ordering   information   for  each   site.   The   system   features   a
comprehensive  work order system and will  automatically  generate  work
orders for  repetitive  and preventive  maintenance  tasks.  The package
offers an integrated  planning and  scheduling  solution,  an integrated
purchasing  module  that  creates  quotes,   requisitions  and  purchase
orders,  a  statistical  preventive  maintenance  module  and  budget to
actual  analysis.  The  security  provided in the  package is  adaptable
and  definable  and can be set to  maintain  a complete  audit  trail of
transactions.

    MP2  Enterprise  v5.0.  This  product  is  designed  to  handle  the
functional  demands of medium to large  enterprises and is available for
both  Oracle and  Microsoft  SQL Server  databases.  It is built  around
Microsoft  Windows  95 or Windows NT and  Microsoft  Office(R) certified
interface,  thin client "intranet ready"  architecture and features full
email   integration,   Microsoft  OLE  (Object  Linking  and  Embedding)
capability  and  a  well-defined   open  API  (Application   Programming
Interface)   architecture   for  easy  integration  to  other  corporate
systems.  The package  concentrates  processing on the server to enhance
efficiency   and  is  capable   of   handling   both  high   volumes  of
transactions  and large  numbers  of  concurrent  users.  The  system is
designed  for use over  wide-area-networks  linked to a central  server.
In addition  to the  various  features  found in MP2  Professional,  the
software   offers  a  failure   analysis  tree,   multi-site   inventory
tracking,   drag-and-drop   work  order   scheduling  and  an  open  API
architecture.

    MP5  (formerly  R5  CAMMS).   Through  its  acquisition  of  SQL  in
December  1996,  Datastream  acquired  the  rights  to  SQL's  R5  CAMMS
product.  MP5 is a portfolio of integrated  modules  designed to enhance
the  management of high-value  assets  throughout  asset  lifecycles and
finds  applicability in diverse industrial and commercial  applications,
including  process   installations,   transport,   utilities,   consumer
products/packaging,  facilities,  telecommunications,  defense, etc. MP5
addresses  configuration  management,  workflow  management,   inventory
management,   document  management,   purchasing   management,   project
management,   workflow   capacity   management   and   financial/budgets
management through its various modules (base, assets,  work,  materials,
purchasing,  projects,  inspections,  budgets,  and business application
integration)  and options  (documents,  flexible  reporting,  positions,
systems,  permits,  quotations,  contracts,  bar-coding,  scheduling and
asset   tracking).   Other  unique   features   include  an   outsourced
maintenance   activity   tracker,   a  standard  library  of  frequently
executed  work  orders,  a  short-term   scheduling  feature,  a  report
manager,  extensive  security  features and on-line,  context  sensitive
help. The MP5 system is language  independent,  allowing  concurrent use
of  multiple   languages   within  one   installation.   The  system  is
presently  offered  in twelve  languages,  including  English,  Spanish,
French,  German,  Italian,  Danish,  Dutch,   Czechoslovakian,   Polish,
Swedish,  Chinese,  and  Portuguese.  MP5 offers a widely  scalable  and
flexible   platform,    having   been   developed   using   the   Oracle
Designer/Developer   2000  tool  set.   MP5   utilizes   object-oriented
design,  stored  procedures,  Oracle Forms 4.5 and the Oracle 7 database
to ensure  database  integrity and a robust,  scalable,  enterprise-wide
application  that is interface  independent and will run concurrently in
native Microsoft  Windows mode as well as on X/Motif or  character-based
terminals.   Specific  links  have  been   established  with  Enterprise
Resource  Planning  (ERP) vendors such as Oracle,  SAP, BAAN and Dun and
Bradstreet.   Generic  applications   integration  capabilities  support
diverse  systems  such  a  MRPII,   JIT/TQC,   financial   applications,
scheduling,  document  management,   condition  monitoring,   geographic
information  systems (GIS) and Human  Resources.  Finally,  MP5 supports
OLE 2 integration with popular PC packages such as Microsoft.

    Several  add-on  products  were  released  in  1997  to  expand  the
capabilities of MP2 products.  These include:

    Weblink.  Weblink  helps a customer  capitalize  on their  corporate
intranet  investment and the global  internet by easily  extending basic
MP2  Enterprise  functionality  to each machine  with  intranet/internet
access using a standard internet browser.

    PagerLink.  This add-on  automatically  notifies any employee with a
text  pager  when MP2  Enterprise  generates  a work  order on  assigned
equipment.   If  the  first   page   gets  no   response,   the   system
automatically escalates to another employee or supervisor.

    MP2 Explorer.  This product  allows to  graphically  tour a facility
and  graphically  drill down to more detailed  levels before  linking to
MP2 Enterprise for full details on a specific asset identified.

    Oracle  Applications  Interface.  Software  that  provides  for data
interchange  capabilities  between MP2 Enterprise  for Oracle  databases
with the Oracle Financials suite of products.


    Pricing.    Datastream's   entry-level   package,   MaintainIt,   is
available  through  catalogs and  directly  from the Company for $189 in
the single-user  configuration;  networked  configurations are priced at
$299 for a two-user  network and $699 for a ten-user  network.  One-year
maintenance  and support  subscriptions  for  MaintainIt  are  presently
available  for  $79  in  the  single  user  configuration,  $129  in the
two-user  network  version  and $299 in the  ten-user  network  version.
MaintainIt  Pro is  available  directly  from the  Company  and  through
catalogs for $995 in a single-user  configuration;  network versions are
available  in a two- to  three-user  configuration  for  $1,495 and in a
four- to ten- user configuration for $1,995.

    MP2  Professional  (for  Access)  presently  sells  for  $1,995 on a
single-user  basis,  $2,995 for two to three  users,  $3,995 for four to
ten  users.  MP2  Professional  (for SQL  servers)  presently  sells for
$4,995 for a single-user  with an incremental  $995 for each  additional
user.   Various   modules  of  optional   software  are  also  available
including  Weblink and  RequestLink,  which both sell for $1,995 for one
to five users and increase up to $4,995 for  unlimited  users.  One-year
maintenance  and support  subscriptions  for MP2  Professional  range in
price  from $795 for a single  user to $2,495 for 50 or more  users.  In
1994,  the Company  introduced  the MP2 "Bundle" as a means of packaging
an array of  optional  modules  and  services  to  increase  the average
sales  per  transaction.  The  Bundle  is  a  package  of  standard  and
optional  features,   including  MP2  Professional,   Barcode  Software,
Custom   Toolbox,   Custom  Work  Orders  and  Purchase   Orders,   OSHA
regulations   database  and  Network  Software.   Support  for  the  MP2
Professional  Bundle  ranges from $1,595 for a single user to $2,795 for
50 or more users.  Management  believes  that  per-transaction  revenues
have  increased  since the "Bundle" was  introduced.  The  client/server
version  of  MP2  Professional  sells  for  $4,995  for  a  single  seat
installation  with  each  seat  thereafter  selling  for  $995.  Options
offered  with MP2 for  Windows  Professional  client/server  include all
those offered with MP2  Professional  file/server;  pricing  ranges from
$495 to  $9,995  depending  on the  option  and  the  number  of  users.
One-year  maintenance  and  support  subscriptions  for MP2 for  Windows
Professional  client/server cost $900 for the initial  installation with
support for each seat  thereafter  costing $180.  Support for additional
options  ranges  from  $90 to  $1,800  per  option  depending  on  which
options have been purchased.

    MP2  Enterprise  sells for  $14,995  for a  three-seat  installation
with each seat  thereafter  selling for  $1,995.  Options  offered  with
MP2  Enterprise   include  all  those  offered  with  MP2  Professional;
pricing  ranges from $495 to $9,995  depending  on the option.  One-year
maintenance  and support  subscriptions  for MP2 Enterprise  cost $2,700
for the  initial  three seat  installation  with  support  for each seat
thereafter  costing $360.  Support for  additional  options  ranges from
$90  to  $1,800  per  option   depending  on  which  options  have  been
purchased and the number of users.

    RequestLink  and  Weblink  range in price from $995 for a  five-user
file/server    configuration   to   $4,995   for   the    unlimited-user
client/server  version.   Pagerlink  (beta  version)  is  available  for
$1,995.  MP2  Explorer  sells for $9,995 for a five user version with an
added  $1,495 for each  additional  user.  Oracle  Financials  sells for
approximately  $25,000  depending  on the  services  delivered  with the
software.

    List  price  for  the  MP5  product  is  $78,000  for a  five-module
standard  configuration  (base  module plus asset,  work,  material  and
purchasing  management  modules)  supporting  a minimum of eight  users.
Additional  modules are priced from $5,000 to $15,000,  depending on the
module.  Installation,  consulting,  training, and installation services
generally   add  from   75%  to  100%  of  the  cost  of  the   software
installation,  and an annual  technical  support  contract  is priced at
18%  of  the  cost  of  the   software   license.   Systems   supporting
additional users are priced higher.

    All of the foregoing prices are subject to change.

Services

    Approximately  55%, 57% and 54% of the Company's  revenues for 1997,
1996 and 1995,  respectively,  were derived  from sales of  professional
and support  services.  Management  believes that the need for expertise
in  installing,  customizing  and using  CMMS/EAMS  systems will grow as
products   evolve  and  the   sophistication   of   software   solutions
increases,  and as MRO software is increasingly  employed as a strategic
cost  reduction  tool.  With  increases  in sales  of the  client/server
version  of MP2  Professional  and  MP2  Enterprise  and  the  increased
complexity  and   sophistication  of  the  needs  of  the  client/server
market,   management   believes  that  revenues  from  professional  and
support  services  could  continue to increase.  However,  the extent to
which  the   Company's   services   revenues  will  grow  is,  as  noted
previously   in  this  Report,   dependent   upon   continued   customer
acceptance  of  client/server  tools and  applications  in general  and,
specifically,  the results of the Company's  entry into this  developing
market.  Management  believes that the  integration of SQL's product mix
into the Company's product line will generate  increasing  opportunities
for sales of  engineering  services and could  accelerate  the growth of
services  revenues as a  percentage  of total  revenues.  SQL  generated
approximately  62%,  67% and 59% of its  revenues  for 1997,  1996,  and
1995, respectively, from sales of consulting and support services.

    Fee-based  consulting  and  advisory  services  are  offered  by the
Company's  Professional  Services Group.  Professional  service revenues
also include  revenues from  training,  installation  and  customization
services  offered  by the  Customization  Group and  system  integration
services  provided by its Integration  Services Group.  Support services
revenues include revenues from maintenance and support subscriptions.

    Professional  Services.  The  Professional  Services  Group provides
fee-based   consulting   and  advisory   services  and   configures  and
implements   CMMS/EAMS   software   licensed   by   the   Company.   The
department's    primary   function   is   to   provide    solutions   to
customer-specific  applications  problems such as spare parts  inventory
management,  meeting  regulatory  requirements  and  reducing  unplanned
equipment  downtime  through improved work order planning and preventive
maintenance.  Most  Professional  Services  Group services are performed
in  connection  with  installations  of the  Company's  systems  and the
Company's  sales personnel  actively seek to sell a five-day  package of
consulting  services  as  part  of  each  license.   The  Company  is  a
licensee  of  Aladon   Reliability   Centered   Maintenance   (RCM),   a
functionality-based   maintenance  approach  developed  by  the  airline
industry  in  the  early  1960's.  Reliability-centered  maintenance  is
most  useful  in  maintenance   situations  where  the  consequences  of
catastrophic  failure are high, such as airline crashes,  fuel tank farm
fires,   etc.  RCM  focuses  on  testing,   inspection  and  potentially
redundant  systems  to  ensure  failure  risk is  minimized.  There  are
presently 171 field  engineers  assigned to the  Company's  Professional
Services  Group.   Most  of  these   individuals   have  backgrounds  in
manufacturing   and   operations.   Eight   of   these   employees   are
RCM-licensed at present.

    The  Professional  Services  Group also  offers  fee-based  training
services  at  its  Greenville,  South  Carolina  headquarters,   at  its
Irvine,  California;   Dallas,  Texas  and  Chicago,  Illinois  training
facilities,  and in  frequent  regional  training  seminars  around  the
country.  The Company  offered a total of 505 training  seminars in 1997
and 419 training  seminars in 1996.  Custom  training  programs are also
available.

    In  late  1994,   Datastream  increased  its  service  offerings  to
include a Customization  Group,  which enhances the  functionality  of a
system for a particular  customer,  and an Integration  Services  Group,
which provides fee-based,  on-site  installation and systems integration
services  for   client/server   systems.   In  1995,  the   Professional
Services  Group  implemented a SWAT team approach that invests  whatever
time is required at a customer  tool,  crib or parts store room (usually
two or three weeks) to  inventory,  sort,  label and  organize  parts or
tools,  and  load  associated  data  into  the  system.  If the  Company
continues  to  install   client/server   systems  in  the   marketplace,
management   believes  that  revenues   attributable  to  customization,
integration  services and SWAT team  services  could also  increase.  In
1996,  Datastream  implemented  a project  management  group to  oversee
and manage large, project-oriented installations of its software.

    Support  Services.  One-year  maintenance and support  subscriptions
range  in cost  from  $79  for  MaintainIt  to  $2,495  for a  50+-user,
networked  MP2  Professional  system to $19,620 for a similar 50 or more
user networked MP2 Enterprise  system.  Maintenance and support services
include unlimited,  toll-free access to Datastream's  TechSupport staff,
free  product   upgrades   (including  data   conversions),   access  to
Datastream's   electronic   bulletin  board,   "Datastream   OnLine"  (a
24-hours  a day,  5-days a week  electronic  mail  feature  that  allows
customers  to  communicate  with  the  Company  as well  as  with  other
customers),   a  file  download  and  upload  service,   product  forums
containing  information  and problem  solutions,  and a "chat" mode that
allows  customers  to engage in on-line  conversations.  As of March 20,
1998, the Company employed 65 personnel in support operations.

    Toll-free  customer  support numbers are presently  available in the
United  States as well as most  Western  European  nations,  Canada  and
Mexico.  Management  believes that a majority of the Company's  customer
base  presently  subscribes  to a  Datastream  maintenance  and  support
contract.

    The  Company  provides  support for the SQL  customers  via a tiered
approach.  First-level  support  is  provided  locally  by  the  country
sales office,  with back-up  expertise  being  supplied by the corporate
help desk in Greenville,  South  Carolina.  Cost for a typical  one-year
maintenance and support  subscription is approximately  18% of the price
of  the  software  installation.  As of  March  20,  1998,  the  Company
employed  13  personnel  in  support  operations  for the  former  SQL's
products.

Customers

    Datastream  markets its  products as  cross-industry  solutions  for
maintenance   and  repair   and  spare   parts   inventory   information
management.  Datastream  has sold  systems to  companies  in 23 standard
industrial  classification  ("SIC") codes  representing  virtually every
major   industry.   Datastream   systems  are  found  in  virtually  all
industries in which large capital  investments  are the  norm--electric,
gas  and  sanitary,  chemicals  and  allied  products,   electronic  and
electrical   equipment,   health  services,   transportation,   property
management,  pulp and paper  mills,  rubber  and  plastics,  oil and gas
extraction,  petroleum refining,  food and kindred products,  fabricated
metals,    industry   and   commercial    machinery,    mining/quarrying
non-metals,  etc.  While the Company has a customer  base that  includes
many  Fortune  500  companies,  its  low-cost,  high-value,  high-volume
pricing  strategy  is  designed  to make  its  products  economical  for
smaller companies as well.

    The Company  (including  SQL's 1997 unit sales only) has sold almost
36,000  units since  inception  and has grown its  installed  base by an
average  of  70%   annually   during   the  last  5  years.   The  broad
applicability   of  the  Company's   systems  is   demonstrated  by  the
diversity of the Company's  customer base,  which includes the following
customers   currently   using  the   Company's   products   in  selected
industries:

Aerospace/Defense                   General Manufacturing

Bell Helicopter Textron             Bic
General Dynamics                    Caterpiller
McDonnell Douglas                   Colgate Palmolive
NASA                                Cooper Industries
                                    Levi Strauss & Co.
Automotive                          Shaw Industries
                                    Kimberly Clark
Dana Corporation                    SONOCO
Eaton                               Polaroid
Echlin/Automotive Controls
Corp.                               Government
Harley Davidson
Lear Seating Corporation            City of Baton Rouge, LA
Modine                              Diego Garcia Naval Air Base
Aaron's Automotive Products           (Burns & Roe)
                                    McClellan Air Force Base
Chemicals                           New York Department of
                                      Corrections
Dow Chemical                        U.S. Army
DuPont                              U.S. Geological Survey
Glidden Company
Monsanto                            Healthcare
Morton International
Rhone Poulenc                       Gurwin Jewish Geriatric Center
ICI                                 Greenville Hospital System
Witco                               Gwinnett Hospital System
                                    Indian Health Service
Computers, Electronics, Electrical  Memorial Sloan Kettering
    and Communications              Cancer Center
                                    Mercy Medical Springfield
Advanced Micro Devices, Inc.        St. Martha's Regional Hospital
Airtouch Cellular                   Tucson Medical
AT&T Global Information Solutions
AT&T Wireless                       Metals
Cox California PCS
Dell Computers                      Alcoa
Emerson Electric                    Alumax
Hewlett Packard                     American Steel
Pacific Bell Mobile Services        Kaiser Aluminum
Texas Instruments                   Nucor Steel
Thermo Electron                     Meynolds Metals
US West Wireless
                                    Petroleum
Food
                                    Chevron
Cargill                             Fina Oil
Frito-Lay                           Mobil Chemical
Kraft Foods                         Texaco
Kroger                              Unocal
Pepsico
Pontiac Foods                       Pharmaceuticals
Procter & Gamble
Stroh Brewery                       Abbott Labs
Swiss Miss (Hunt Wesson)            Kaiser Permanente
Ben & Jerry                         Parke Davis
Ruiz Food Products                  Warner-Lambert

General Facilities                  Hospitality

A&S Jordan Marsh                    Four Seasons Hotel--Philadelphia
American Greetings                  Holiday Inn
Atlantic Union College              Marriott
BMG Music                           Registry Resort--Naples, FL
Cutler-Hammer,                      New York, New York Resort & Casino
Div. of Eaton Corp.
Family Dollar                       Shipping and Transport
Foster Wheeler
Gillette                            London Underground
Kmart                               Paris Metro
Maritz                              BC Transit
New York University                 Toronto GO Transit
Pillsbury Center                    Port of Rotterdam
Johnson Controls
                                    Utilities

                                    London Electricity
                                    Denver Metro Wastewater
                                    Gottenburg Energi

    No customer has  represented  more than 1.5% of the Company's  total
annual revenue in any of the last three fiscal years.


Sales and Marketing

    The Company  continues to increase its sales and  marketing  efforts
and staff.  The Company  markets its products  and services  through 209
sales and marketing  professionals  (as of March 20, 1998),  including a
direct  sales  force  of  96  telesales  representatives  with  specific
geographic  responsibilities  and a  direct  outside  sales  force of 82
with   specific   geographic   responsibilities.   The  Company  uses  a
computerized   sales  and  marketing   software   system  with  database
marketing,  telemarketing,  lead  tracking  and  analysis  and  customer
support capabilities.

    The Company's  marketing  department consists of 23 employees and is
responsible   for   generating   leads   through   advertising,   public
relations,  trade shows and seminars,  strategic partnerships and direct
mail.  The  marketing   department  is  also   responsible  for  product
marketing,   market  research  and  competitive  analysis  and  provides
competitive,  customer and  prospect  input into the  Company's  product
development  efforts.  To  enhance  its  marketing  efforts,  Datastream
sponsors  a  National  Users   Conference   each  year.  The  conference
provides  an  opportunity  for  decision  makers in the MRO  industry to
attend training  sessions,  workshops and presentations  addressing both
maintenance issues generally and Datastream products  specifically,  and
to interact with other users and Company employees.

    The  cornerstone  of the Company's  sales and  marketing  efforts is
its 96-person  telesales team. The relatively  inexpensive nature of the
Company's  systems,  combined  with the  excellent  quality  of  product
information  and order  fulfillment  items  generated  by the  marketing
department,  make the  Company's  telesales  approach  a  cost-effective
vehicle for accessing the  Company's  target market and achieving  gains
in market share.  Management  routinely  monitors the performance of the
Company's  telesales  personnel  to  determine  that each  member of the
telesales  staff  is  performing  acceptably.  The  Company  intends  to
utilize the existing SQL  infrastructure  to expand its telesales  force
in Europe.

    During 1997,  the Company  greatly  expanded its Corporate  Accounts
direct  sales  force  to call  on  larger  accounts  and to  market  its
enterprise-wide CMMS/EAMS solutions, including MP5, worldwide.

    Internationally  the  Company  uses a  direct  and  telesales  sales
force out of its offices in The  Netherlands,  United  Kingdom,  France,
Mexico  as well  as its  Greenville,  South  Carolina  headquarters.  In
addition,  the Company has a network of distributors  located throughout
the balance of Europe, Latin America and the Pacific Rim.


Product Development

    In  its  product  development  activities,   the  Company  seeks  to
incorporate  into  its  products  technologies  already  identified  and
embraced  by  the  marketplace,  as  opposed  to  expending  development
efforts  on  unproven  or  unaccepted  technologies.  For  example,  the
Company's  products are designed to exploit proven  technologies such as
client/server  architectures,  relational  database  management systems,
graphical  user  interfaces  and  application   development  tools.  New
opportunities,  whether technology-,  application- or regulatory-driven,
are evaluated for technical  feasibility and market  acceptance prior to
any development.

    As of March 20, 1998, the Company's product  development  department
consisted of 91 technical  employees,  including 56 software  developers
(all  of  whom  hold  advanced  programming  or  engineering   degrees).
Datastream's 1997 product development focused on several areas:

    MP2  Professional  and MP2 Enterprise  5.0 SQL Server  Editions were
released in March 1997.  This product was the  Company's  first  totally
client/server  application  supporting  Microsoft  SQL  Server  and  was
written with a fully  compiled  object  oriented  language.  The product
was  certified  Microsoft  Office  compatible  and  certified  Microsoft
Backoffice compatible.  Two versions of the product were developed:  the
Enterprise  version is the full featured  version that includes a set of
Application  Program  Interfaces  (API's)  enabling  users to  interface
with MP2 from third party  applications.  The Professional  version does
not include these API's.  Enhanced  features  include failure  analysis,
work  order   scheduling,   location  based  work  orders  and  enhanced
reporting capabilities

    MP2  Enterprise  v5.0  Oracle  Edition  was  released  in June 1997.
Identical to the SQL Server  edition  product,  5.0 Oracle  supports the
Oracle  database.  An upgrade,  MP2  Enterprise  v5.1,  was  released in
November 1997.  MP2 Enterprise  v5.1 included  several  enhancements  to
purchasing  and  inventory as well as the  financial  API's which allows
MP2 Enterprise  v5.1 to directly  export data to purchasing,  accounting
or ERP applications.

    MP2  Enterprise 6.0 went into beta testing in September  1997.  This
major upgrade to the Company's  Oracle Database  product adds multi-site
functionality  and a two-way  financial  interface.  This feature allows
multiple  physical  sites to share a single  database,  with  each  site
only having access to it's own set of data.  Enhanced  security allows a
single  person  to have  access  privileges  for  data  pertaining  to a
single  site  or  multiple   sites.   This  is   extremely   helpful  to
organizations  that  want  to do all  purchasing  for all  sites  from a
central  location but still want  maintenance  and inventory  data to be
segregated  and  accessible  only to the site from which it  originates.
Also  released  for  beta  testing  in  September  1997  was the  second
version of an interface to Oracle  Applications.  This  interface is the
first to take  advantage  of the MOSIA  architecture  included in Oracle
6.0.  The  release of this  product  is  scheduled  for the 3rd  quarter
1998.

    Weblink 1.0 was  released  for beta in December  1997.  This product
runs  in a  browser  and  allows  any  user  to  submit  and  monitor  a
requisition or work order request.

    During 1997,  work  progressed  on an upgrade to the  Company's  MP2
Professional  v4.6  file/server  product.  MP2  Professional  5.0 Access
will have the same  graphical  user interface and feature set as SQL 5.0
and Oracle 5.0 but will run on the Microsoft Access database.

    The former SQL  developers  focused  their 1997 efforts on improving
the  functional  quality of MP5 and adding to it the user interface that
is consistent  across all products  offered by  Datastream.  This allows
customers to upgrade  software  packages  with a minimum of training and
inconvenience.

    Current   development   efforts  are  focused  on  the  version  7.0
client/server  product.  This product  will be  web-based  and utilize a
component  based,  3-tier  architecture.  Advantages of this  technology
are low cost of  ownership  because the  product  will be able to be run
from a browser,  increased  scalability  due to the 3-tier  architecture
and better performance, especially over low speed wide area networks.

    Datastream  received Year 2000  certification  for it's  development
methods from the Information  Technology  Association of America (ITAA).
This means the  Company  has the  correct  controls  in its  development
process  and  methods  to  ensure  the  software  produced  is Year 2000
compliant.  The  following  primary  products are  considered  Year 2000
compliant:  MaintainIt  2.0,  MaintainIt  3.0,  MaintainIt Pro 3.01, MP2
Professional  4.6 (16 and 32 bit versions),  MP2  Professional  5.0, MP2
Enterprise  (all  version  5  series),  MP2  Enterprise  (all  version 6
series) and MP5.

    In  addition  to  the  new  product  development  projects,  several
existing   products  were  translated  into  several  foreign  languages
during 1997.

    Although  management  believes  that the  research  and  development
staff will be able to meet their  development  challenges,  there can be
no assurance  that the above or any other  development  projects will be
completed in a timely  manner or will result in a product that  achieves
market acceptance.

    Product  development  expenses  consist  principally of salaries and
certain other  expenses  related to  development  and  modifications  of
software  products,  which are  capitalized in accordance with Statement
of  Financial   Accounting   Standards  No.  86  ("Statement  No.  86"),
"Accounting  for the Costs of Computer  Software  to be Sold,  Leased or
Otherwise  Marketed."  Capitalization  of such  costs  begins  only upon
establishment of  technological  feasibility as defined in Statement No.
86 and ends when the resulting  product is available  for  distribution.
Annual   amortization  of  capitalized   product  development  costs  is
provided at the greater of the ratio of current  product  revenue to the
total of current and  anticipated  product revenue or on a straight line
basis over the estimated  economic  life of the  software,  which is not
more than  eighteen  months or three  years,  depending  on the product.
The  Company's  software  development  expenditures  were  approximately
$2.31 million,  $4.00 million and $6.65 million in 1995,  1996 and 1997,
respectively.   Of  these   amounts,   the  amounts   capitalized   were
approximately    $573,000,    $2.61    million   and   $2.29    million,
respectively.   During  December  1996,  the  Company  took  a  one-time
charge  of  $1.804  million  related  to the  write-off  of  capitalized
software  deemed  obsolete  or  superseded  by  the  products   obtained
through acquisition of SQL.

    The  Company's   industry  is   characterized  by  rapidly  changing
technology,  frequent new product  introductions  and evolving  industry
standards that can render  Company  products  obsolete or  unmarketable.
The  Company's  future  success  will depend upon its ability to enhance
its  current  products,   to  introduce  new  products  that  adequately
address   technological   and  market   developments  and  to  meet  the
increasingly   sophisticated   needs  of  its  customers.   Furthermore,
approximately  99% of the  Company's  1997  revenues  were  derived from
sales of the Windows  versions of MP2,  MaintainIt,  MaintainIt Pro, MP2
Professional,   MP2  Enterprise   and  MP5  and  related   services  and
support.  Accordingly,  the Company's financial  performance in the near
term will depend on continued  market  acceptance of these products and,
to  a  lesser  extent,   on  the  introduction  and  acceptance  of  new
products,   such  as  the  SQL  Server  client/server   version  of  MP2
Enterprise.


Competition

    The current  market for CMMS/EAMS  software is both  fragmented  and
highly  competitive.  Management  estimates that there are more than 200
vendors of CMMS/EAMS  software  products and anticipates that the market
will  continue to attract  new  competitors  in the future.  Competition
at the high end of the market  comes from large  vendors  such as Marcam
Corporation,  Project Software and Development,  Inc. (PSDI),  The Indus
Group (which  recently  acquired The System  Works  (TSW)),  and several
ERP vendors such as SAP, whose  programs  originated  with  minicomputer
and  mainframe-based  programs,  and  which  now  offer  enterprise-wide
management  systems  (including  maintenance  modules)  for  use  in the
client/server    environment.    Increasing    customer    demand    for
client/server  products  may  make  the  Company  subject  to  increased
competition  if these vendors  choose to modify their  products to offer
lower-priced client/server capabilities in PC network markets.

    The Company  has  historically  concentrated  its efforts at the low
end  of  the  CMMS/EAMS  market  in  which  typical   transaction  sizes
(including  software  and  customization,   integration,   training  and
support  services)  range from  $1,000 to  $10,000.  In these  segments,
Datastream encounters  competition from a variety of vendors,  including
companies such as CK Systems,  JB Systems and DP Solutions,  Inc.,  that
offer  off-the-shelf  CMMS  applications  for single users (or a limited
number of users) on personal computers and local area networks.

    In late 1995,  the Company  introduced  a  client/server  version of
its MP2  product  and has  sought  to  expand  sales of its  middle-tier
client/server  technology  (aimed at Customers with revenues in the $250
million to $500 million range) both  domestically  and  internationally.
This move placed the Company  into  increased  competition  with certain
of its competitors who offer  client/server  products,  such as PSDI and
TSW.  Further,  the  acquisition  of SQL puts the  Company  into  direct
client/server  competition  across each of the product  lines offered by
PSDI  and  TSW,  as well as in  competition  with  products  offered  by
Revere  Corporation  and  certain  ERP  vendors.  The  Company  competes
internationally  with both local or  regional  providers  of  CMMS/EAMS,
and with  CMMS/EAMS  vendors that operate on a global  basis.  Local and
regional  competitors are generally smaller,  but are more knowledgeable
of the  specific  markets  in which  they  compete.  Global  competitors
such as PSDI and  Indus  participate  actively  in the  European,  Latin
American  and Pacific Rim  countries,  entering  these  markets  through
distributors,  direct  sales and  service  offices or through  strategic
partnerships.  Competition  in these  countries  is  frequently  intense
and while the Company has been  successful in  integrating  SQL so as to
compete from a local basis in Europe,  and extending  elsewhere  through
distributorships,  there is no guarantee  that the company will continue
to prevail in these  markets.  Management  believes  that the  Company's
products  are  differentiated  by  technology,   product   architecture,
features,  functionality and value pricing,  and that the Company itself
is now  differentiated  from much of the competition with respect to the
ability to deliver  sales,  service and support on a global  basis,  but
there is no assurance  the Company will be  successful in its efforts to
compete in the client/server market.

    Throughout  1996 and 1997,  the Company also expanded into new areas
of the  low-end  CMMS/EAMS  market,  through its  entry-level  products,
MaintainIt  and  MaintainIt  Pro,  which  compete  directly  with  other
low-end maintenance automation software products.

    Management  believes that while some  competitors,  particularly  at
the high end of the  market,  are large,  publicly-held  companies,  the
majority  of  vendors  in  the   industry   are  small,   privately-held
companies,  and that  most new  market  entrants  will  fall  into  this
category.  The emergence and  establishment  of new  competitors  in the
market may adversely impact  Datastream's market share.  Moreover,  many
potential  customers  develop  their own  system  internally,  utilizing
methods such as  spreadsheets  and word processors to track repair parts
inventory  and  equipment,  although the trend in the industry is toward
purchasing  third-party  maintenance  software  rather  than  developing
such  products  internally.   A  certain  percentage  of  the  Company's
revenues are derived from sales to large  corporations  whose internally
developed  systems  did  not  meet  management's  expectations,  did not
succeed  in  sufficiently  reducing  maintenance  budgets  or lacked the
capacity  to  adequately   track   historical   data  or  provide  other
necessary or desirable equipment-related information.

    The  Company's  products  compete  on the basis of  quality,  price,
technical  support and service,  application  features and  ease-of-use.
Management  believes that the Company's  products compete favorably with
respect to these  factors.  However,  certain of the Company's  existing
competitors,  as well as a number of  potential  market  entrants,  have
greater  financial,   marketing,   service  and  support  and  technical
resources  than  the  Company.  The  Company  will be  required  to make
continued   investment  in  product   development  to  meet  competitive
pressures.  There  can  be no  assurance  that  the  Company  will  have
sufficient  resources  to make  those  investments  or that the  Company
will be able to make the  technical  advances  necessary  to continue to
compete effectively in the future.


Proprietary Rights and Licenses

    The  Company  claims  that title to and  ownership  of the  software
developed  by  Datastream  and  SQL  resides   exclusively   with  those
companies.  The  Company  relies  on  a  combination  of  trade  secret,
copyright and trademark laws,  nondisclosure  and licensing  agreements,
the  contractual   provisions  in   "shrink-wrap"   licenses  and  other
contractual   provisions   and   technical   measures   to  protect  its
intellectual  property  rights.  There can be no  assurance  that  these
protections  will be  adequate  to protect  the  Company's  intellectual
property   rights   or  that   the   Company's   competitors   will  not
independently  develop  software  products  that  are  superior  to  the
Company's   products.    Existing   copyright   laws   provide   limited
protection   to   the   Company   in   prohibiting    competitors   from
independently   producing   software  products  that  are  substantially
similar  to   Datastream's   products.   Neither   Datastream   nor  SQL
currently holds any patents or has any patent applications pending.

    Although  in limited  instances  involving  large  sales the Company
may specifically  negotiate  license  agreements that are signed by both
the  licensee  and the Company,  in the  substantial  majority of sales,
the Company relies on a  "shrink-wrap"  license for  protection  against
unauthorized   use  of  its  products.   Certain   provisions  of  these
licenses,   including   restrictions  on  use,  copying,   transfer  and
disclosure  of the  licensed  program,  may be  unenforceable  under the
laws of certain  jurisdictions.  In  addition,  through the  acquisition
of SQL and based upon its  internal  expansion  efforts,  the Company is
increasing  the  sales of its  products  internationally.  This  entails
certain  additional  intellectual  property  risks  in that  the laws of
some foreign countries do not protect the Company's  proprietary  rights
to the same  extent as do the laws of the United  States.  Although  the
Company  believes that its products,  trademarks  and other  proprietary
rights do not infringe  upon the  proprietary  rights of third  parties,
there  can  be  no   assurance   that  such   parties  will  not  assert
infringement  claims  against the  Company.  Any such claim made against
the  Company,  with  or  without  merit,  could  be  time-consuming  and
expensive  to  defend.   The  loss  of   proprietary   technology  or  a
successful  claim  against  the  Company  could have a material  adverse
effect on the Company's financial condition and results of operations.

Employees

    The  Company  has  recently  experienced  substantial  growth in the
scope of its  operations  and the number of its  employees.  This growth
has  resulted  in  increased  levels of  responsibility  for  management
personnel.   To  meet  its  growth   objectives,   Datastream   will  be
required  to  devote  significant  resources  to  enhance  its  existing
products and develop new ones,  manage the  anticipated  development  of
its  international  operations  and  establish  and  manage  cooperative
relationships  such as its relationship  with Grainger.  There can be no
assurance  that the  management  skills and systems  currently  in place
will be adequate to keep pace with the Company's growth objectives.

    In  addition,   Datastream's   continued   success  depends  on  the
services of several key  executive,  sales and  marketing  and technical
employees.  The loss of the  services of these  personnel,  particularly
those of Larry G.  Blackwell,  the Company's  founder,  Chairman,  Chief
Executive Officer and President,  or the Company's  inability to attract
and  retain  other  qualified   management,   sales  and  marketing  and
technical  employees,  could  have  a  material  adverse  effect  on the
Company's business and results of operations.

    As of  March  20,  1998,  the  Company  employed  565  persons  on a
full-time  basis,  including  209 sales  and  marketing  personnel,  208
service and support  representatives,  57  administrative  personnel and
91  employees  involved in product  research  and  development.  None of
Datastream's  employees is represented by a labor  organization  and the
Company  is  not  a  party  to  any  collective   bargaining  agreement.
Management  considers  relations  between the Company and its  employees
to be very good.

Trademarks

    Datastream(R),MaintainIt(R), SideArm(R), MP2(R),Personal Maintenance
Assistant(R), RequestLink(R), The Maintenance Journal(R), The Leader  in
Maintenance Software(R), EP2(R), Step-By-Step(R) and Partnership Between
Technology and  Practice(R)  are  registered  trademarks  of the Company.
MP2 Weblink(TM),MP2 Explorer(TM),MP2 Professional(TM),MP2 Enterprise(TM),
MP2 Millenium(TM) and MP5(TM) are trademarks of the Company. Grainger(R)
is  a  registered  trademark  of  W.W.  Grainger, Inc.  ORACLE(R) is  a
registered  trademark  of  Oracle  Systems  Corporation.  Paradox(R)  is
a  registered  trademark  of  Borland  International,  Inc.  Windows(R),
Windows 95(R) and  Windows NT(R) are registered  trademarks of Microsoft
Corporation.


Item 2.  Properties.

    The  Company  conducts  its  principle  operations  out of a 125,000
square  foot   headquarters   building  located  in  Greenville,   South
Carolina.   The  Company  also  has  under  lease  approximately  12,000
square feet of space in Rotterdam,  The  Netherlands  (lease  expiration
November   2002),   approximately   5,000   square   feet  of  space  in
Minneapolis,  Minnesota (lease expiration  October 1998),  approximately
4,000 square feet of space in Slough,  Great Britain  (lease  expiration
March  2000) and  approximately  3,000  square  feet of space in Irvine,
California (lease expiration January 2000),  approximately  3,250 square
feet of space in Grenoble,  France  (lease  expiration  February  1999),
approximately  2,000  square  feet of  space  in  Paris,  France  (lease
expiration  August  2001),  approximately  1,500 square feet of space in
Chicago,  Illinois  (lease  expiration  December  1999),   approximately
1,500 square feet of space in Dallas,  Texas (lease  expiration  January
2000)  and  approximately  1,000  square  feet of  space  in  Monterrey,
Mexico (lease expiration January 2000).


Item 3.  Legal Proceedings.

    Datastream  is  occasionally  involved  in  litigation  relating  to
claims   arising  out  of  its   operations  in  the  normal  course  of
business.  Neither  Datastream  nor  SQL  is  currently  engaged  in any
legal  proceedings that are expected,  individually or in the aggregate,
to have a material adverse effect on the Company.


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

    A Special Meeting of Stockholders was held on Monday,  December  22,
1997  at  which  time  such  stockholders  voted  on,  and  approved,  a
proposal to amend the  Company's  Amended and  Restated  Certificate  of
Incorporation  to increase from  15,000,000 to 40,000,000  the number of
shares of Common  Stock the Company is  authorized  to issue.  Indicated
below is the number of shares  represented  at the meeting and  entitled
to vote and voting for, against or abstaining as to such matter.


                   Shares            Shares          Shares
                    For              Against        Abstained

                 7,811,432           335,326          7,540


                                    PART II


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

    The Common  Stock of the  Company  is traded on the Nasdaq  National
Market  under the symbol  DSTM.  The Company has never  declared or paid
any cash  dividends on its Common Stock.  However,  in  anticipation  of
its secondary  public  offering in October 1995, the Company  declared a
two-for-one  stock split,  effected in the form of a  one-for-one  share
dividend,  effective  September 12, 1995. The Company  declared a second
two-for-one  stock split,  effected in the form of a  one-for-one  share
dividend,  effective  January 30,  1998.  The Company  anticipates  that
all of its earnings will be retained for the  development  and expansion
of the  Company's  business  and does  not  anticipate  paying  any cash
dividends  in the  foreseeable  future.  The chart  below sets forth the
high/ask and low/bid  prices for each quarter of the Company's  last two
fiscal  years.  The prices below  reflect the  two-for-one  stock splits
which occurred on September 12, 1995 and January 30, 1998.



<PAGE>
    Quarter Ended            High/ask              Low/bid

    March 31, 1996             11.75                 8.125
    June 30, 1996              18.25                11.625
    September 30, 1996         17.5                 12.125
    December 31, 1996          15.00                 8.50

    March 31, 1997             12.25                 7.875
    June 30, 1997              10.625                6.25
    September 30, 1997         19.50                 7.50
    December 31, 1997          19.125                10.50

    The  closing  price  of a share  of the  Company's  Common  Stock on
March 20, 1998 was $20.125.  As of March 20,  1998,  the Company had 155
shareholders  of record and  approximately  6,000  beneficial  owners of
its Common Stock.


Item 6.  Selected Financial Data.

                                     For the year ended December 31,

                                1993     1994     1995     1996     1997
                                ----    -----     -----    -----    ----

                               (in thousands, except operating
                                    and per share data)

Statement of Operations Data:
Total revenues................. $5,878  $10,374  $20,346  $32,466  $69,768
Total cost of revenues(1)......  1,704    3,136    5,218   11,507   22,131
                               -------  -------  -------  -------  -------
Gross profit...................  4,174    7,238   15,128   20,959   47,637
Total operating expenses (2)...  3,360    4,813    9,216   47,758   31,076
                               -------  -------  -------  -------  -------
Operating income (loss)........    814    2,425    5,912  (26,799)  16,561
Net other income...............     13       42    1,176    2,370      987
                               -------  -------  -------  -------  -------

Income (loss) before income
taxes..........................    827    2,467    7,088  (24,429)  17,548
Income taxes...................    320      915    2,742    3,581    6,110
                               -------  -------  -------  -------  -------
Net income (loss)..............$   507 $  1,552 $  4,346 $(28,010)$ 11,438
                               =======  ======= ======== ======== ========

Basic net income (loss)
    per share..................$   .05 $    .15 $    .33 $  (1.65)$    .62
                               ======= =======  ======== ======== ========
Diluted net income (loss)
     per share.................$   .05 $    .15 $    .30 $  (1.58)$    .59
                               ======= =======  ======== ======== ========

Basic weighted average
common shares outstanding...... 10,366   10,366   13,004   16,977   18,397

Diluted weighted average
common shares outstanding...... 10,366   10,366   14,366   17,686   19,246

Operating Data:
Software units sold at
period-end (cumulative)........  5,252    7,332   11,964    24,787  35,465

<PAGE>
                                           As of December 31,

                                 1993     1994      1995      1996    1997
                                 ----     ----      ----      ----    ----
Balance Sheet Data:
Working Capital.............    $ 662   $1,569   $19,965   $13,633  $22,290
Total Assets................    2,978    5,790    50,692    57,577   65,097
Long-term debt, less
current portion.............       68       46        22     2,893      603
Total stockholders' equity..      564      916    46,034    33,125   47,108

(1)In 1996, includes $1,804 of capitalized  software  written off as  a
   result of  the  acquisition  of  SQL (see  note  1(i) of  notes   to
   consolidated financial statements).

(2)In 1996,  includes  $33,600 of  in-process  research and  development
   acquired  and  written  off as part of the  acquisition  of SQL  (see
   note 2 of the notes to consolidated financial statements).


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

    The  following  discussion  should be read in  conjunction  with the
"Selected  Financial  Data"  and  the  Financial  Statements  and  Notes
thereto of the Company included herein.


Overview

    Datastream was  incorporated  in 1986 to develop,  market,  sell and
support  software  products for the industrial  automation  market.  The
Company's  revenues  have grown  each  calendar  year  since  inception.
Excluding the one-time  charges  related to the  acquisition of SQL, the
Company  has been  profitable  in each of the last  five  years  and has
experienced  a  compounded  annual  growth rate of 76% in  revenues  and
108% in earnings during that period.

    The Company  offers a complete  family of CMMS/EAMS  products to the
MRO  industry.   See   "Business--Products".  Generally  these  products
consist  of  4  major  categories  based  on  price  and  functionality.
MaintainIt and MaintainIt Pro are off-the-shelf,  entry-level  solutions
for small to medium  businesses.  MP2  Professional  is a full  featured
integrated  maintenance  system  for small to  mid-size  companies.  MP2
Enterprise  combines the  benefits of PC servers and PC networks  with a
Windows  graphical user interface and SQL relational  database.  Through
the  Company's  acquisition  of SQL in  December  1996,  the Company now
also  offers  SQL's MP5  (formerly  R5 CAMMS),  high-end  EAMS  product.
Datastream   and   SQL   support   their   software   products   through
professional and support  services.  The Company  recognizes  revenue in
accordance  with SOP  91-1,  "Software  Revenue  Recognition."  See Note
1(c) of the Company's  Financial  Statements for additional  information
concerning the Company's revenue recognition policies.


<PAGE>
    Until 1995,  the Company  concentrated  its  resources on developing
Microsoft   DOS/Windows   compatible  software  for  use  on  standalone
computers  or PC network  systems.  Recently,  development  efforts have
focused on introducing  enterprise-wide  Windows client/server  products
for  Oracle  and  Microsoft  SQL  Server.   Product   development  costs
consist  principally of salaries and certain other  expenses  related to
development   and   modification   of  software   products,   which  are
capitalized  in  accordance  with  Statement  of  Financial   Accounting
Standards No. 86  ("Statement"),  "Accounting  for the Costs of Computer
Software to Be Sold,  Leased or Otherwise  Marketed".  Capitalization of
such costs begins only upon  establishment of technological  feasibility
as  defined  in the  Statement  and ends when the  resulting  product is
available  for   distribution.   Annual   amortization   of  capitalized
product  development  costs is  provided  at the greater of the ratio of
current  product  revenue  to  the  total  of  current  and  anticipated
product  revenue  or  on  a  straight  line  basis  over  the  estimated
economic  life of the software,  which is not more than eighteen  months
or three years, depending on the product.

    Revenues  from sales  outside  the  United  States  were  negligible
until  1995,  when   international   revenues  reached  10.7%  of  total
revenues.  International  revenues  increased to 13.4% of total revenues
in 1996,  and 36.6% in 1997,  primarily  as a result of the  acquisition
of SQL.  Management  expects that  international  revenues will continue
to increase as a percentage of total  revenues,  due to both SQL, and to
Datastream's  own  internal  expansion  efforts.  On a pro forma  basis,
1996  revenues  adjusted  for  the  inclusion  of SQL  would  have  been
approximately  $49.2 million.  Of that figure,  approximately  37% would
have  been  derived  from  international  sources.  The  Company  hedges
against a defined  range of movements in the exchange  rates between the
currencies  in  which  it  does  virtually  all  its  business.  As  the
Company  begins  to  accept  increased  payments  in  foreign  currency,
significant  changes in the values of these foreign currencies  relative
to  the  United  States  dollar  may  affect  the  Company's   financial
condition and results of  operations.  In addition,  gains and losses on
currency   translations   could   contribute  to   fluctuations  in  the
Company's  results  of operations.  See "-Safe  Harbor  Statement--Risks
Associated With International Sales".

    The  Company's  principal  areas of  operation  include  the  United
States  and  Europe.  Information  about  the  Company's  operations  in
different geographic locations in 1997 is as follows:

                              United
                              States         Europe             Total
                              ------         ------             -----
                                           (in thousands)

   Total revenues      $ 52,299  75.0%  $ 17,470  25.0%   $ 69,768  100%
   Operating income    $ 11,179  67.5%  $  5,383  32.5%   $ 16,561  100%
   Identifiable assets $ 56,697  87.1%  $  8,400  12.9%   $ 65,097  100%

    The United  States  operations  include  international  revenues  of
approximately   $8,100,000   for  the  year  ended  December  31,  1997.
International  revenues  for the year ended  December  31, 1995 and 1996
were approximately $2,180,000 and $4,354,000, respectively.


<PAGE>
    Many   software   companies   experience   seasonal   variations  in
revenues.  The Company has experienced  twenty-two  consecutive quarters
of  increasing  total  revenues.  Although  this growth does not reflect
seasonal  variations in the  Company's  operating  results,  the Company
believes  that its  future  results  of  operations  may be  subject  to
quarterly  variations.  The  acquisition  of SQL has exposed the company
to  seasonal  revenue   fluctuations  in  Europe,   principally   slower
business  conditions  in the  first  and  third  quarters  of the  year.
Datastream has  historically  experienced an increase in revenues in the
quarter  (Q2  1997 and Q2 1996)  during  which  the  Company  holds  its
annual  Technical  User Group  Conference.  The next such  conference is
presently  scheduled  to be held in June 1998  (although no assurance of
such an increase in 1998 can be given).

Because the Company  consummated  the acquisition of SQL on the last day
of fiscal  1996 and the  transaction  was  accounted  for as a purchase,
SQL's  results of  operations  for fiscal  1996 are not  included in the
Company's  fiscal 1996  results.  For 1996,  SQL  generated  revenues of
approximately  $17.3  million  and  a net  loss  of  approximately  $5.9
million.   Although  the  Company  has   successfully   integrated   and
rationalized  SQL's operations,  the acquisition of SQL has impacted and
will   continue  to  impact  the   reporting   control  and   management
capabilities  of the Company in 1998.  See "-'Safe  Harbor'  Statement -
Impact of SQL Acquisition".

Results of Operations

    The  following  tables set forth  statement of  operations  data for
the three years ended  December 31, 1995,  1996 and 1997, the percentage
change   in  such  data   from   period  to  period   for  each  of  the
corresponding  periods and the percentage  that such data bears to total
revenues for each period.


<PAGE>
                                 Year Ended December 31,     Percent
Change
                                 1995      1996      1997    95-96    96-97
                                   (in thousands, except per share data)

Statement of Operations Data:
Revenues:
    Product.................... $9,343   $14,018   $31,174    50.0%   122.4%
    Professional services......  6,660    12,326    26,438    85.1    114.5
    Support....................  4,343     6,122    12,156    41.0     98.6
                                -------   -------   -------   ------ ------

       Total revenues.......... 20,346    32,466    69,768    59.6   114.9

Cost of revenues:
    Cost of product revenues...  1,136     1,879     3,133    65.5    66.7
    Cost of professional-
       services revenues.......  3,383     6,729    15,160    98.9   125.3
    Cost of support revenues...    699     1,095     3,838    56.7   250.5
    Write-off of capitalized
       software................     -      1,804        -     N/M     N/M
                               -------   -------   -------   ------ ------

       Total cost of revenues..  5,218    11,507    22,131   121.0    92.3

Gross Profit................... 15,128    20,959    47,637    38.5   127.3

Operating expenses:
    Sales and marketing........  5,216     9,399    18,617    80.2    98.1
    Product development........  1,741     1,390     4,364   (20.1)  213.9
    General and administrative.  2,259     3,369     8,095    49.1   140.2
    Write-off of in-process
      research & development...     -     33,600       -      N/M     N/M
                               -------   -------   -------   ------ ------

       Total operating expenses  9,216    47,758    31,076   418.2   (34.9)
                               -------   -------   -------   ------ ------

Operating income(loss)........   5,912   (26,799)   16,561  (553.3)  161.8
Net other income..............   1,176     2,370       987   101.5   (58.4)
                               -------   -------   -------   ------ ------

Income(loss) before income taxes 7,088   (24,429)   17,548  (444.7)  171.8
Income taxes..................   2,742     3,581     6,110    30.6    70.6
                               -------   -------   -------   ------ ------

Net income(loss) ............. $ 4,346  $(28,010) $ 11,438  (744.5)  140.8
                               =======   =======   =======   ====== ======
Basic net income (loss)
    per share................. $   .33  $  (1.65)  $   .62  (600.0)% 137.6%
                               =======   =======   =======   ====== ======
Diluted net income(loss)
    per share................. $   .30  $  (1.58)  $   .59  (627.0)% 137.3%
                               =======   =======   =======   ====== ======
N/M -- Not meaningful

<PAGE>

                                                  Year Ended December 31,
Statement of Operations Data:                     1995     1996     1997
                                                  ----     ----     ----
Revenues:
    Product...................................    46.0%    43.2%    44.7%
    Professional services.....................    32.7     38.0     37.9
    Support...................................    21.3     18.8     17.4
                                                ------   ------   ------

       Total revenues.........................   100.0    100.0    100.0

Cost of revenues:
    Cost of product revenues..................     5.6      5.8      4.5
    Cost of professional service revenues.....    16.6     20.7     21.7
    Cost of support revenues..................     3.4      3.4      5.5
    Write off of capitalized software.........       -      5.6        -
       Total cost of revenues.................    25.6     35.5     31.7
                                                ------   ------   ------

Gross Profit..................................    74.4     64.5     68.3

Operating expenses:
    Sales and marketing.......................    25.6     28.9     26.7
    Product development.......................     8.6      4.3      6.3
    General and administrative................    11.1     10.4     11.6
    Write off of in-process research
      and development                               -     103.5       -

       Total operating expenses...............    45.3    147.1     44.6
                                                 -----    -----    -----

Operating income(loss)........................    29.1    (82.6)    23.7
Net other income..............................     5.8      7.3      1.4
                                                 -----    -----    -----

Income(loss) before income taxes..............    34.9    (75.3)    25.1
Income taxes..................................    13.5     11.0      8.7
                                                 -----    -----    -----

Net income(loss)..............................    21.4%   (86.3)%   16.4%
                                                 =====    =====    =====


1997 Compared to 1996 and 1996 Compared to 1995

    Total  Revenues.   Total  revenues  for  1997  increased  114.9%  to
approximately  $69.8 million from  approximately  $32.5 million in 1996,
due  principally to the impact of the  acquisition  of SQL Group,  BV on
December  31,  1996,   introduction  of  foreign  language  versions  of
Datastream's  MP2  Professional and MaintainIt Pro in Europe through the
SQL channels,  continued  acceptance  of the  Company's  products in the
global industrial  automation market,  expansion of the Company's sales,
professional and technical support service  organizations,  introduction
of MP2  Enterprise  in  March  1997,  followed  by  translated  versions
catering to several European  languages,  introduction of RequestLink in
late 1996 and the  expansion  of the sales and  marketing  functions  to
support the  Company's  telesales and direct sales  programs.  The total
growth in  revenues  of  114.9%  is  comprised  of a 49.9%  increase  in
Datastream's  revenues,  an additional  growth of 36.0%  attributable to
the  acquisition  of SQL and a 29.0% growth in SQL's revenues for fiscal
1997.  Total revenues for 1996 increased  59.6% to  approximately  $32.5
million from  approximately  $20.3 million in 1995, due principally to a
number of factors,  including the continued  acceptance of the Company's
products  in  the  industrial   automation  market,   expansion  of  the
Company's   sales,    professional   and   technical   support   service
organizations,  introduction  of MP2  for  Windows95/NT  in  June  1996,
introduction of MaintainIt Pro in September 1996,  increased  demand for
the  client/server   version  of  MP2  Professional  in  the  industrial
automation  market,  and the addition of sales  personnel  and marketing
resources  to  support  the   Company's   telesales   and  direct  sales
programs.  International  revenues were approximately  $25.4 million, or
36% of total  revenues in 1997,  compared to $4.4  million , or 13.4% of
total  revenues in 1996,  compared to  approximately  $2.2  million,  or
10.7% of total revenues, in 1995.

    Product revenues  increased  122.4% to  approximately  $31.2 million
in  1997  from  approximately  $14.0  million  in  1996,  and  50.0%  to
approximately  $14.0  million in 1996 from  approximately  $9.3  million
in  1995.  These  increases  are  due  to  expansion  of the  number  of
software  products  being sold,  growth in the number of software  units
sold,  and an  increase  in the  average  selling  price of the  systems
sold.  As a percentage  of revenues,  revenues  from  software  products
increased  to 44.7% in 1997 from  43.2% in 1996 and  decreased  to 43.2%
in 1996 from 46.0% in 1995.

    Professional  Service  revenues  increased  114.5% to  approximately
$26.4  million  in 1997 from  approximately  $12.3  million  in 1996 and
85.1% to  approximately  $12.3 million in 1996 from  approximately  $6.7
million in 1995.  These  increases  generally  reflect the impact of the
acquisition of SQL,  increased  installation,  training and  integration
services   provided   to  support   increased   product   sales.   As  a
percentage of revenues,  revenues from professional  services  decreased
slightly to 37.9% in 1997 from 38.0% in 1996 and  increased  to 38.0% in
1996 from 32.7% in 1995.

    Technical    support   service    revenues    increased   98.6%   to
approximately  $12.2 million in 1997 from  approximately $6.1 million in
1996,   and  41.0%  to   approximately   $6.1   million   in  1996  from
approximately   $4.3  million  in  1995.  These  increases  reflect  the
impact  of the  acquisition  of SQL  and an  increase  in the  type  and
variety of services  provided to a larger  installed  customer  base. As
a  percentage  of  total  revenues,   revenues  from  technical  support
services  decreased  to 17.4% in 1997  from  18.8% in 1996 and  21.3% in
1995.

    Cost of  Revenues.  Cost of  product  revenues  as a  percentage  of
total  revenues  decreased  to  4.5%  in 1997  from  5.8%  in  1996  and
increased  to  5.8%  in  1996  from  5.6% in  1995.  The  decrease  as a
percentage   of  revenues  in  1997  from  1996  and  1995   principally
reflects  decreased  amortization  of  capitalized  software  costs as a
percentage  of product  costs,  the smaller  component  of product  cost
reflected in SQL's product  revenues,  decreased  costs  associated with
printing  and  replication  of  the  Company's  software  products,  and
volume  discounts  realized on shipping costs.  The slight increase as a
percentage   of  revenues  in  1996  from  1995   principally   reflects
increased  amortization  of  capitalized  software costs as a percentage
of product costs.

    Cost of  professional  services  increased as a percentage  of total
revenues  to 21.7% in 1997  from  20.7% in 1996 and  16.6% in 1995.  The
increase  as a  percentage  of  revenues  in  1997  from  1996  was  due
primarily   to  the   acquisition   of  SQL  which   experiences   lower
utilization  of  professional  service  personnel  during  the first and
third quarters  resulting from seasonal  business cycles in Europe.  The
decrease  as a  percentage  of  revenues  in  1996  from  1995  was  due
primarily to decreased  utilization of engineers  during the second half
of  the  year  resulting  from  increased   hiring  to  support  planned
services growth.

    Cost  of  technical  support  services  as  a  percentage  of  total
revenues was 5.5%, 3.4% and 3.4% in 1997,  1996 and 1995,  respectively.
The  increase  from 1996 to 1997 as a  percentage  of revenues  reflects
the  impact of the  acquisition  of SQL  which  sells  larger  contracts
containing a larger component of technical support service cost.

    Cost of revenue in 1996 included a one-time  $1.8 million  write-off
of  capitalized  software  which  became  obsolete  as a  result  of the
acquisition  of  SQL  (see  note  1(i)  to  the  consolidated  financial
statements).  No such charges against income were taken in 1997.

    Sales and  Marketing  Expenses.  Sales and  marketing  expenses  for
1997 increased 98.1% to approximately  $18.6 million from  approximately
$9.4  million  in  1996,  and  increased  80.2%  to  approximately  $9.4
million  from  approximately  $5.2 million in 1995.  As a percentage  of
total  revenues,  these  expenses were 26.7% in 1997,  28.9% in 1996 and
25.6%  in  1995.  The  decrease  as a  percentage  of  revenues  in 1997
from 1996 was due primarily to increased  productivity  of the sales and
marketing  staff  combined  with  increased  market  acceptance  of  the
Company's  products.  The increase as a  percentage  of revenues in 1996
from 1995 was due  primarily to increased  commissions  and sales travel
expenses.

    Product   Development   Expenses.   Total  expenditures  on  product
development,    including    capitalized    expenses,    increased    to
approximately  $6.7 million in 1997 from  approximately  $4.0 million in
1996 and from  approximately  $2.3 million in 1995.  The increases  were
primarily  due to the hiring of  additional  employees  and third  party
consultants  to  work  on  the  Company's  file/server,   client/server,
MaintainIt/Pro  and foreign language products.  The Company  capitalized
software  expense of  approximately  $2.3 million,  $2.6 million and $.6
million,  respectively,  in  1997,  1996  and  1995,  which  represented
34.4%,  65.2% and 24.8% of total  expenditures  for product  development
in  the  respective  periods.  Capitalization  of  software  expense  is
expected to decrease as a  percentage  of total  development  expense in
1998  because the  majority of projects  qualifying  for  capitalization
have  been or will be  released  for  revenue  shipments  in  1998.  Net
product development  expenditures were approximately $4.4 million,  $1.4
million  and $1.7  million  in 1997,  1996 and 1995,  respectively.  Net
product  development  expenses as a  percentage  of revenues  were 6.3%,
4.3% and 8.6% in 1997,  1996 and  1995,  respectively.  Amortization  of
capitalized  product  development  costs is  charged  to cost of product
sales and  totaled  approximately  $1.5  million,  $.5  million  and $.3
million in 1997, 1996 and 1995,  respectively.  Management believes that
these  capitalized  software  assets will be  recoverable  out of future
product sales.

    General and  Administrative  Expenses.  General  and  administrative
expenses  include the cost of the  Company's  finance,  human  resources
and   information   services.   General  and   administrative   expenses
increased   140.2%  to   approximately   $8.1   million   in  1997  from
approximately  $3.4  million in 1996,  and 49.1% to  approximately  $3.4
million in 1996 from  approximately  $2.3 million in 1995, due primarily
to the acquisition of SQL which  historically  spent more on general and
administrative  categories,  increased administrative personnel required
to support  the  Company's  growth,  increased  reserves  and  increased
expenses  associated  with being a public  company.  As a percentage  of
total  revenues,  general  and  administrative  expenses  were  11.6% in
1997, 10.4% in 1996 and 11.1% in 1995.

    Write-off  of  in-process   research  and  development   costs.  The
company  expensed $33.6 million of in-process  research and  development
acquired as part of the  acquisition  of SQL. Also in  conjunction  with
the  acquisition  of SQL in 1996,  the Company  wrote off  approximately
$1.8 million of capitalized  software which  represented  investments in
products  rendered  redundant or obsolete by the  acquisition of the SQL
product  line.   These   one-time   charges   resulted  in  the  Company
reporting  a loss in 1996  (see note (2) to the  consolidated  financial
statements).

    Other  Income/Expense.  Other income  decreased $1.4 million in 1997
from   approximately  $2.4  million  in  1996,  after  having  increased
approximately  $1.2 million in 1996 from  approximately  $1.2 million in
1995.  The  decrease  from  1996  to 1997  was  primarily  due to  lower
interest  earned on smaller  investment  balances  which  resulted after
remitting   the   cash   portion   of  the   purchase   of  SQL  to  its
shareholders.  The  increase  from 1995 to 1996 was due to the  interest
earned on higher  investment  balances  realized upon  completion of two
public  offerings  of  Common  Stock in April  1995  and  October  1995,
respectively.

    Income  Taxes.  The  Company's  effective  income  tax rate for 1997
increased to 34.8% 1997 from (14.6%) in 1996,  primarily  due to the tax
treatment  of  the  SQL  acquisition  and  related  costs.  Without  the
effect of the  acquisition,  the  Company's  effective tax rate for 1996
would  have been  36.5%  and the  decrease  from  1996 to 1997  could be
attributed  principally to increased  product  development  tax credits.
Likewise,  the  effective  tax rate decrease from 38.7% in 1995 to 36.5%
in  1996,  excluding  the  effects  of  the  SQL  acquisition,  was  due
primarily to increased development tax credits.

    Net  Income(loss).  The  Company's  net income  increased  140.8% in
1997 to  approximately  $11.4  million or $.62 basic  earnings per share
($.59 diluted earnings per share) from a loss of  approximately  ($28.0)
million  in  1996,   and   decreased   744.5%  in  1996  to  a  loss  of
approximately  $(28.0)  million  or  $(1.65)  basic  earnings  per share
(($1.58)  diluted  earnings  per  share),   from   approximately   $4.35
million,  or $.33 basic  earnings per share ($.30  diluted  earnings per
share) in 1995.  The  increase  in net  income  is due to the  impact of
the  acquisition  of SQL and  internal  growth of revenues  during 1997.
The loss in 1996 is directly  attributable to the one-time  write-off of
costs  associated  with the  acquisition of SQL.  Before  accounting for
the one time charges  associated  with the  acquisition,  the  Company's
net income increased 64% to $7.1 million in 1996.


Quarterly Results

    General.  Many software  companies  experience  seasonal  variations
in  revenues.   The  Company  has  experienced   twenty-two  consecutive
quarters of  increasing  total  revenues.  Although this growth does not
reflect  seasonal  variations in the Company's  operating  results,  the
Company  believes that its future  results of operations  may be subject
to  quarterly  variations.  The  acquisition  of  SQL  has  exposed  the
company to seasonal revenue  fluctuations in Europe,  principally slower
business  conditions  in the  first  and  third  quarters  of the  year.
Datastream has  historically  experienced an increase in revenues in the
quarter  (Q2  1997 and Q2 1996)  during  which  the  Company  holds  its
annual  Technical  User Group  Conference.  The next such  conference is
presently  scheduled  to be held in June 1998  (although no assurance of
such an increase in 1998 can be given).

    The following table presents certain unaudited  quarterly  financial
information  for  each  of  the  eight  quarters   through  the  quarter
ended   December  31,  1997.   In  the  opinion  of   management,   this
information  has  been  prepared  on  the  same  basis  as  the  audited
financial  statements  appearing  elsewhere  in this  Form  10-K  Report
and all  necessary  adjustments  (consisting  only of  normal  recurring
adjustments)  have been included in the amounts  stated below to present
fairly the unaudited  quarterly  results when read in  conjunction  with
the audited  financial  statements  of the  Company  and notes  thereto.
The  Company's  quarterly  results  have in the  past  been  subject  to
fluctuations,  and thus the  operating  results  for any quarter are not
necessarily  indicative  of results for any future  period.  All amounts
shown (except per share amounts) are expressed in thousands.



<PAGE>
                                             Quarter
                                              Ended

                                  1996                          1997
                                  ----                          ----
                       March   June   Sept.  Dec.  March   June  Sept.  Dec.
                        31,    30,    30,    31,     31,    30,    30,    31,

Revenues:
  Product............ $3,073 $3,259 $3,652 $4,034  $6,148 $6,851 $8,195 $9,980
  Professional
    services.........  2,489  2,813  3,070  3,954   5,783  6,909  6,187  7,559
  Support............  1,340  1,632  1,543  1,607   2,751  3,054  3,018  3,333
                       -----  -----  -----  -----   -----  -----  -----  -----
   Total revenues....  6,902  7,704  8,265  9,595  14,682 16,814 17,400 20,872
Cost of revenues:
  Cost of product
    revenue..........    361    491    473    554     844    695    746    848
  Cost of professional
    service rev......  1,177  1,443  1,716  2,393   3,530  3,712  3,738  4,180
  Cost of support
    revenue..........    265    261    258    311     687  1,090  1,134    927
  Write off of
    capitalized software   -      -      -  1,804       -      -      -      -

  Total cost of
    revenues.........  1,803  2,195  2,447  5,062   5,061  5,497  5,618  5,955
                       -----  -----  -----  -----   -----  -----  -----  -----
Gross profit.........  5,099  5,509  5,818  4,533   9,621 11,317 11,782 14,917
Operating expenses:
  Sales and marketing  2,128  2,234  2,269  2,768   4,273  4,694  4,605  5,045
  Product development    417    301    358    314     834  1,036  1,180  1,314
  General and
    administrative...    628    867    805  1,068   2,236  1,773  1,522  2,564
  Write off of
    in-process research
    and development..      -      -      - 33,600       -      -      -      -
                       -----  -----  -----  -----   -----  -----  -----  -----
Total operating
expenses.............  3,173  3,402  3,432 37,750   7,343  7,503  7,307  8,923
                       -----  -----  -----  -----   -----  -----  -----  -----
Operating income(loss) 1,926  2,107  2,385(33,217)  2,278  3,814  4,475  5,994
Net other income.....    576    581    590    623     208    282    249    248
                       -----  -----  -----  -----   -----  -----  -----  -----
Income(loss) before
  income taxes.......  2,502  2,687  2,976(32,594)  2,486  4,096  4,724  6,242
Income taxes.........    963   1036  1,146    436     508  1,495  1,748  2,359
                       -----  -----  -----  -----   -----  -----  ----- ------

Net income (loss)... $1,539 $1,651 $1,830$(33,030) $1,978 $2,601 $2,976 $3,883
                      ====== =====  ====== ======   =====  =====  =====  =====
Basic net income
(loss) per share..... $  .09  $ .10  $ .11 $(1.95)  $ .11  $ .14   $.16 $  .21
                       =====  =====  =====  =====   =====  =====  =====  =====
Diluted net income
(loss) per share.....  $ .09  $ .10  $ .11 $(1.88)  $ .11  $ .14   $.15 $  .19
                       =====  =====  =====  =====   =====  =====  =====  =====



<PAGE>
    The table  below sets forth the  percentage relationship  of certain
items  to  total  revenues  with  regard  to the  Company's  results  of
operations  for each of the eight  quarters  through the  quarter  ended
December 31, 1997.


                                                   Quarter
                                                    Ended
                                     1996                      1997
                                      ----                      ----
                              Mar   Jun   Sep   Dec     Mar   Jun   Sep   Dec.
                               31,   30,   30,   31,     31,   30,   30,   31,

Revenues:
  Product............        44.5% 42.3% 44.2%  42.0%  41.9% 40.7 %47.1% 47.8%
  Professional services      36.0  36.5  37.2   41.2   39.4  41.1  35.6  36.2
  Support............        19.5  21.2  18.6   16.8   18.7  18.2  17.3  16.0
                             ----  ----  ----   ----   ----  ----  ----  ----
   Total revenues....       100.0 100.0 100.0  100.0  100.0 100.0 100.0 100.0
Cost of revenues:
  Cost of product revenue..   5.2   6.4   5.7    5.8    5.7   4.1   4.3   4.1
  Cost of professional
      service revenue......  17.1  18.7  20.8   24.9   24.0  22.1  21.5  20.0
  Cost of support revenue..   3.8   3.4   3.1    3.2    4.7   6.5   6.5   4.4
  Write-off of capitalized
      software.                 -     -     -   18.7     -     -     -     -
                             ----  ----  ----   ----   ----  ----  ----  ----
   Total cost of revenue...  26.1  28.5  29.6   52.6   34.5  32.7  32.3  28.5
                             ----  ----  ----   ----   ----  ----  ----  ----
Gross profit.........        73.8  71.5  70.4   47.4   65.5  67.3  67.7  71.5
Operating expenses:
  Sales and marketing        30.8  29.0  27.5   28.9   29.1  27.9  26.5  24.2
  Product development         6.0   3.9   4.3    3.3    5.7   6.2   6.8   6.3
  General & administrative.   9.1  11.3   9.8   11.1   15.2  10.5   8.7  12.3
  Write-off of in-process
      Research & Development    -     -     -  350.2     -     -     -     -
                             ----  ----  ----  -----   ----  ----  ----  ----
  Total operating
      expenses...........    46.0  44.2  41.5  393.5   50.0  44.6  42.0  42.8
                             ----  ----  ----   ----   ----  ----  ----  ----
Operating income(loss)       27.9  27.3  28.9 (346.1)  15.5  22.7  25.7  28.7
Net other income.....         8.3   7.5   7.1    6.5    1.4   1.7   1.4   1.2
                             ----  ----  ----   ----   ----  ----  ----  ----
Income(loss) before
income taxes.........        36.3  34.9  36.0 (339.6)  16.9  24.4  27.1  29.9

Income taxes.........        14.0  13.5  13.9    4.5    3.5   8.9  10.0  11.3
                             ----  ----  ----   ----   ----  ----  ----  ----

Net income(loss).....        22.3% 21.4% 22.2% 344.1%  13.5% 15.5% 17.1% 18.6%
                             ====  ====  ====  =====   ====  ====  ===== ====



Liquidity and Capital Resources

    Since  its  inception,  the  Company  has  financed  its  operations
through a  combination  of  private  equity  financing,  bank  loans and
lines of  credit,  and,  beginning  in 1988,  through  cash  flows  from
operations.  In  1995,  1996  and 1997  operating  activities  generated
cash  totaling   approximately  $2.8  million,  $6.2  million  and  $2.2
million,  respectively,  primarily related to increases in net income in
1995 and 1997,  and increases in net income before  acquisition  related
charges in 1996.

    In 1995,  1996 and  1997,  the  Company  used  cash  from  investing
activities  of  approximately  $41.5  million,  $2.1  million  and  $4.8
million  primarily  related to the purchase of  short-term  investments,
additions   to  property,   plant  and   equipment   and   additions  to
capitalized  software  development  costs.  The  Company  completed  its
initial  public  offering  in  April  1995,   raising  net  proceeds  of
approximately  $13.6  million,  and a second public  offering in October
1995,  raising  net  proceeds  of  approximately   $25.1  million.   The
proceeds  of  these   offerings   were   invested  in  U.S.   government
securities.

    The  Company  maintains  a  multi-currency  bank line of credit that
provides  for  borrowings  of 70% of  accounts  receivable  less than 60
days aged up to $5.0  million.  This line  expires on December 15, 1998.
No  borrowings  were  outstanding  under the line of credit at  December
31, 1997.

    The  acquisition  of SQL was completed  for $34 million,  consisting
of $17  million  in cash,  $14  million  in  stock  issued  pursuant  to
Regulation  S,  $3  million  in  escrowed   stock,   and  assumption  of
outstanding  liabilities.   Following  the  acquisition,  SQL  long-term
debt totaling  approximately  $2.7 million was repaid by the Company and
additional  working  capital  infusions  of  approximately  $2.5 million
were   required   to   sustain   SQL's   operations   and  pay   current
liabilities.  Approximately  $978,000 of SQL's  long-term  debt remains,
of which  approximately  $346,000 is  scheduled  to be repaid by the end
of 1998.

    The  Company's  principal   commitments  as  of  December  31,  1997
consisted  of leases  of  operating  equipment  and its  foreign  office
facilities,   and  there  were  no  material   commitments  for  capital
expenditures.  The  Company  believes  that its current  cash  balances,
availability  under  its line of credit  and cash  flow from  operations
and the proceeds of its public  offerings  will be sufficient to finance
current  operating   requirements,   including   capital   expenditures,
acquisitions  and year  2000  compliance  costs for at least the next 12
months.

Impact of Recent Accounting Pronouncements

    In June 1997,  the Financial  Accounting  Standards  Board  ("FASB")
issued Statement of Financial  Accounting  Standards No. 130, "Reporting
Comprehensive  Income"  (Statement No. 130).  Statement No. 130 requires
companies  to  display,  with the  same  prominence  as other  financial
statements,  the components of comprehensive  income.  Statement No. 130
requires  that an  enterprise  classify  items  of  other  comprehensive
income  by  their  nature  in a  financial  statement  and  display  the
accumulated  balance  of  other  comprehensive  income  separately  from
retained  earnings and additional  paid-in capital in the equity section
of a statement of  financial  position.  Statement  No. 130 is effective
for fiscal years  beginning  after  December 15, 1997.  Reclassification
of financial  statements for earlier  periods  provided for  comparative
purposes is required.  The Company's  financial  statements will include
the  disclosure  of   comprehensive   income  in  accordance   with  the
provisions of Statement No. 130 beginning the first quarter of 1998.

    In June 1997,  the FASB issued  Statement  of  Financial  Accounting
Standards No. 131,  "Disclosures  about  Segments of an  Enterprise  and
Related  Information" (Statement  No. 131).  Statement  No. 131 requires
that  an  enterprise   disclose  certain   information  about  operating
segments  and  is  effective  for  financial   statements   for  periods
beginning after December 15, 1997.

    In  October  1997,  the  Accounting  Standards  Executive  Committee
issued Statement of Position 97-2,  "Software Revenue  Recognition" (SOP
97-2).  SOP  97-2 is  effective  for  financial  statements  for  fiscal
years  beginning  after  December 15, 1997.  The Company does not expect
that  adoption  of SOP 97-2 will  significantly  affect  its  results of
operations.

Inflation

    The Company  believes that  inflation has not had a material  impact
on the  Company's  operating  results and does not expect  inflation  to
have a material impact on the Company's operating results in 1998.

"Safe Harbor" Statement

    The  following  "Safe  Harbor  Statement"  is made  pursuant  to the
Private  Securities  Litigation  Reform  Act  of  1995.  Certain  of the
statements  contained  in the body of this  Report  are  forward-looking
statements  (rather  than  historical  facts)  that are subject to risks
and  uncertainties  that could cause actual results to differ materially
from those  described in the  forward-looking  statements.  With respect
to such  forward-looking  statements,  the Company seeks the protections
afforded by the Private  Securities  Litigation  Reform Act of 1995. The
list set forth below is intended  to identify  certain of the  principal
factors  that  could  cause  actual  results to differ  materially  from
those described in the  forward-looking  statements  included  elsewhere
herein.  These  factors are not  intended to  represent a complete  list
of all risks and uncertainties  inherent in the Company's business,  and
should  be  read  in  conjunction  with  the  more  detailed  cautionary
statements included elsewhere herein.

    Competition.  The  current  market for  CMMS/EAMS  software  is both
fragmented and highly  competitive,  and management expects  competition
to  intensify  as new  companies  enter the  market  and  existing  ones
expand  their  product  lines.  The Company has entered into new markets
at the low end of the market and, more  importantly,  at the high end of
the market  through both its  introduction  of an  internally  developed
client/server   product  line  and  through  the   acquisition  of  SQL.
Management  expects the  Company to face  increased  competition  across
all  products  lines  in  1998.  The  Company's  future  performance  is
partially   dependent   upon  the   Company's   ability  to  respond  to
technological   changes,   evolving   standards  and  its   competitors'
innovations.  Certain  competitors  have greater  financial,  marketing,
service and support and technical resources than Datastream and SQL.

    Effects of  Technological  Change and Risks of Product  Development.
The   Company's   industry   is   characterized   by  rapidly   changing
technology,  frequent new product  introductions  and evolving  industry
standards.  Datastream's  future  success  will  depend upon its ability
to enhance  its  current  products  and  develop  new ones that  address
technological  and  market   developments.   Certain  of  the  Company's
software   research   and   development   efforts  are   technologically
challenging,  and there can be no assurance  that these  efforts will be
successful   or  that  the  resulting   products  will  achieve   market
acceptance.

    Dependence  on a Limited  Number of Products.  Approximately  99% of
the  Company's  1997  revenues  were  derived  from sales of the Windows
versions   of   SideArm,   MP2,   MaintainIt,    MaintainIt   Pro,   MP2
Professional,   MP2  Enterprise   and  MP5  and  related   services  and
support.  Accordingly,  the Company's financial  performance will depend
on  continued   market   acceptance  of  these   products.   Any  factor
adversely affecting sales of the Company's  products,  such as delays in
development,  significant  software flaws,  negative product evaluations
or  incompatibility  with  significant  hardware  platforms could have a
material adverse effect on the Company's results of operations.

    Risks  Associated  with  International  Sales.  International  sales
increased  to  36.0%  of the  Company's  1997  revenues  (from  13.4% in
1996),  and  management  expects  that  an  increasing  portion  of  the
Company's total revenues will be derived from  international  operations
conducted in foreign  currencies.  The Company  conducts  virtually  all
its business in US dollars,  Dutch  guilders,  French Francs and British
pounds.  The Company  hedges  exchange rate  movements on either side of
a  locked-in  spot  rate  for  movements  within  a range of 3.1% on the
dollar-pound rate and 7.5% on the  dollar-guilder  rate.  Changes in the
value of these  currencies  relative  to the  dollar  beyond  the ranges
hedged by the Company  could affect  Datastream's  results of operations
and financial  position,  and gains and losses on currency  translations
could   contribute  to   fluctuations   in  the  Company's   results  of
operations.  In addition,  the deeper exposure to international  markets
opens new areas with which the  Company is not  familiar  and places the
Company in  competition  with new  vendors.  There is no  assurance  the
Company  will  be   successful  in  its  efforts  to  compete  in  these
international markets.

    Fluctuations  in Quarterly  Results.  Traditionally  the Company has
operated  with  very  little  backlog,  and  a  significant  portion  of
Datastream's  revenues in any quarter  were the result of a large number
of relatively  small orders received during a period.  Accordingly,  the
Company was subject to  fluctuations  in the number of overall orders in
any given period,  which in turn was  influenced by the overall level of
economic  and  industrial  activity.   Datastream   establishes  expense
levels  based in part on its  expectations  as to future net  sales.  In
addition,  the  acquisition  of SQL has given the Company  access to the
market for high-end  maintenance  software  solutions,  which  generally
take  longer to  implement  and may  result in a longer  sales  process.
The extended revenue  recognition  process may result in fluctuations in
quarterly  results.  If the Company's  revenues are below  expectations,
operating  results may be materially  adversely  affected.  No assurance
can be given that the  Company  will be able to  maintain  profitability
on a quarterly or annual basis in the future.

    Impact  of SQL  Acquisition.  The  acquisition  of SQL has  impacted
and will  continue  to impact  the  reporting,  control  and  management
capabilities  of  the  Company.   While  management  believes  it  fully
understands  and can  address  the  challenges  encountered  during  the
integration  process,  a  number  of  aspects  of SQL's  business  cause
management  to recognize  that it cannot  provide  assurance  concerning
the  Company's  ability to maintain  revenue or  earnings  growth in the
future at the same levels that have been  achieved  historically.  These
aspects  include the global  scope of SQL  operations,  the fact this is
the Company's first major  acquisition,  the differences  encountered in
the high-end  markets in which SQL competes,  the  seasonality  of SQL's
revenues,  and the fact  that a  disproportionate  share of SQL's  sales
occur at the end of each  quarter  and that the dollar  amount of an SQL
transaction is substantially  greater than the historical  dollar amount
of an average Datastream transaction.

    Risks  Associated  with  the Year  2000.  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  21'st  century dates
from  20'th  century  dates.  As a  result,  in  less  than  two  years,
computer  systems and/or  software used by many companies may need to be
upgraded  to  comply  with  such  "Year  2000"  requirements.  There are
several aspects to the Year 2000 issue, as follows:

    Impact  on  Revenue.   The  Company  believes  that  the  purchasing
patterns of customers  and  potential  customers may be affected by Year
2000  issues  in  a  variety  of  ways.  Many  companies  are  expending
significant  resources  to  correct  or  patch  their  current  software
systems  for Year 2000  compliance.  These  expenditures  may  result in
reduced  funds  available to purchase  software  products  such as those
offered by the  Company.  Conversely,  Year 2000  issues may cause other
companies to accelerate  purchases of software to replace  non-year 2000
compliant  applications,  causing a  short-term  increase  in demand for
the  Company's  products.  There is no assurance  that such  increase in
demand will be  realized,  or that  companies  will resume  purchases of
the  software  offered  by the  Company if and when they  resolve  their
Year  2000  problems.  Either of the  foregoing  could  have a  material
adverse  effect  upon the  Company's  business,  operating  results  and
financial condition.

    Year  2000  Compliance.  The  Company  has  obtained  ITAA Year 2000
certification  and  believes  that the current  versions of its products
are year 2000  compliant.  All Datastream  products use four digit years
for  all  internal   manipulations  and  representations.   The  Company
regularly  runs  regression  tests on its software,  including  tests of
the year 2000  rollover.  Based on the above,  it is not  expected  that
the  Company's  products  will be adversely  affected by date changes in
the year 2000.  However,  there can be no assurance  that the  Company's
products  contain  and  will  contain  all  features  and  functionality
considered necessary by customers,  distributors,  resellers and systems
integrators  to  be  Year  2000  compliant.  Certain  customers  of  the
Company may still be running  earlier  versions of two of the  Company's
products,  developed by the former SQL,  which earlier  versions are not
Year 2000  compliant.  The Company has informed  these  customers of the
need to migrate to current  products that  management  believes are Year
2000  compliant  and/or  has  made  available  a  software  patch  which
management   believes   will  brings  these   products  into  Year  2000
compliance.  The  Company  anticipates  that  generally  throughout  the
software  industry   substantial   litigation  may  be  brought  against
software vendors of non-compliant  operating  environments.  The Company
believes  that any such  claims  against  the  Company,  with or without
merit,  could have a material adverse effect on the Company's  business,
operating results and financial condition.

    Internal  Systems.  The  Company  has  also  reviewed  its  internal
systems for Year 2000  compliance  and is in the process of upgrading to
Year  2000  compliant   versions  from  third  party  software  vendors,
modifying  certain  systems,  and  planning to replace  certain  systems
with new third party  software,  which the  Company  expects to complete
prior to January 1, 2000.  In addition  to making its own  systems  Year
2000 ready,  the  Company  has also begun to contact its keys  suppliers
and  customers  to  determine  the  extent to which the  systems of such
suppliers  and  customers  are Year  2000  compliant  and the  extent to
which  the  Company  could be  affected  by the  failure  of such  third
parties  to be Year  2000  compliant.  The  company  has  created a Year
2000  Committee  to  coordinate  the  efforts to become  fully Year 2000
compliant.  Management  does not  believe  that  the  cost to bring  its
software  products and internal  systems into Year 2000  compliance will
have a material  adverse  effect on the Company's  results of operations
or financial  condition.  However,  delays in upgrading  some systems to
Year 2000  compliance,  or a  failure  to fully  identify  all Year 2000
dependencies  in  the  Company's  systems  and  in  the  systems  of its
vendors,  customers  and  financial  institutions  could  have  material
adverse  consequences,  including  delays  in the  delivery  or  sale of
products.

    Expenses  related  to Year  2000  Compliance.  The  company  has not
incurred  significant  expense in becoming  Year 2000  compliant as this
has  been  achieved  as a part  of  regular  upgrades  to  the  internal
operating  systems.  Future costs  related to Year 2000  compliance  are
not  expected  to  have a  material  adverse  effect  on  the  Company's
results of operations or financial condition.

    As noted  above,  this brief  summary  of  certain of the  principal
factors  that  may  potentially   influence  the  Company's  results  of
operations  and financial  conditions is not intended to be  exhaustive,
and  should be read in  conjunction  with  other  cautionary  statements
made herein and in the Company's publicly-filed reports.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

    Pursuant to the general  instructions  to Rule 305 to SEC Regulation
S-K,  quantitative and qualitative  disclosures  called for by this Item
7A and  by  Rule  305 of SEC  Regulation  S-K  are  inapplicable  to the
Company at this time.

<PAGE>
Item 8.  Financial Statements and Supplementary Data.

    The financial  statements and  supplementary  financial  information
required  by this item are filed as part of this  Report on Form 10-K on
pages  F-1  through  F-25  and  page  S-1   immediately   preceding  the
signature page to this Report.


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

    Not applicable.




                                   PART III

Item 10.  Directors and Executive Officers of the Registrant.

    The  information  required by this item is incorporated by reference
to  information   to  be  included   under  the  caption   "Election  of
Directors-Director   Nominees  Biographical   Information,"  "-Executive
Officers"  and  "-Compliance   with  Section  16(a)  of  the  Securities
Exchange Act of 1934" of the Company's  definitive  Proxy  Statement for
the Annual Meeting of Stockholders to be held on June 12, 1998.

Item 11.  Executive Compensation.

    The  information  required by this item is incorporated by reference
to  information   to  be  included  under  the  captions   "Election  of
Directors-Additional  Information  Concerning  the  Board of  Directors"
and  "Executive  Compensation-Executive   Compensation  Tables"  in  the
Company's   definitive   Proxy  Statement  for  the  Annual  Meeting  of
Stockholders to be held on June 12, 1998.


Item 12. Security Ownership of Certain Beneficial Owners and Management.

    The  information  required by this item is incorporated by reference
to information to be included  under the caption  "Beneficial  Ownership
of Common Stock" in the  Company's  definitive  Proxy  Statement for the
Annual Meeting of Shareholders to be held on June 12, 1998.


Item 13.  Certain Relationships and Related Transactions.

    The  information  required by this item is incorporated by reference
to   information   to  be   included   under  the   caption   "Executive
Compensation-Compensation     Committee     Interlocks    and    Insider
Participation"  in the  Company's  definitive  Proxy  Statement  for the
Annual Meeting of Shareholders to be held on June 12, 1998.






<PAGE>
PART IV

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

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

      1. Financial Statements

         o Independent Auditors' Report.
         o Consolidated Balance Sheets as of December 31, 1996 and 1997.
         o Consolidated  Statements of Operations for the Years Ended
           December 31, 1995, 1996 and 1997.
         o Consolidated Statements of Stockholders' Equity for the Years Ended
           December 31, 1995, 1996 and 1997.
         o Consolidated  Statements of Cash Flows for the Years Ended
           December 31, 1995, 1996 and 1997.
         o Notes to Consolidated Financial Statements.



      2. Financial Statement Schedules:

         o Allowance for Doubtful Accounts Receivable.

         All other  schedules  for  which  provision  is made in the applicable
         accounting  regulations of the  Securities and Exchange Commission are
         not required under the related  instructions  or are inapplicable  and
         therefore have been omitted.




<PAGE>
      3. Exhibits:

      Exhibit
      Number    Description

      2.1*      SQL Systems Group, B.V. Share Purchase Agreement.

      3.1**     Amended and Restated Certificate of Incorporation.

      3.1(a)    Amendment  to  Amended  and  Restated  Certificate  of
                Incorporation, dated January 12, 1997.

      3.2**     By-Laws.

      4.1**     See  Exhibits  3.1  and  3.2  for  provisions  of  the
                Amended and Restated  Certificate of Incorporation and
                By-Laws of the Registrant  defining  rights of holders
                of Common Stock of the Registrant.

      4.2**     Specimen Stock Certificate.

      10.1***   1995  Stock   Option  Plan  as  amended  and  restated
                through May 7, 1997.

      10.1(a)   Amendment  to 1995 Stock  Option  Plan (as amended and
                restated through May 7, 1997), dated March 13, 1998.

      10.2+     Stock  Option  Plan  for  Directors  (as  amended  and
                restated as of April 12, 1996).

      10.2(a)   Amendment  to  Stock  Option  Plan for  Directors  (as
                amended  and  restated  as of April 12,  1996),  dated
                March 13, 1998.

      10.3**    401(k) Retirement Plan of the Registrant.

      10.4++    Amended and Restated Employee Stock Purchase Plan.

      11        Statement re: Computation of Per Share Earnings.

      21        Subsidiaries of the Registrant.

      23        Consent of KPMG Peat Marwick LLP.

      24        Power of Attorney (include on signature page hereto).

      27        Financial Data Schedule.

---------------
 *    Incorporated  herein by  reference to exhibit of the same number
      to the  Company's  Current  Report on 8-K filed January 10, 1997
      (File No. 000-25590).

**    Incorporated  herein by  reference to exhibit of the same number
      in the from S-1  Registration  Statement of the Registrant  (Reg
      No. 33-89498).

***   Incorporated  herein by reference to Appendix A to the Company's
      definitive  Proxy  Statement  for the  1997  Annual  Meeting  of
      Shareholders, filed May 12, 1997 (File No. 000-25590).

+     Incorporated  herein by reference to Appendix C to the Company's
      definitive  Proxy  Statement  for the  1996  Annual  Meeting  of
      Shareholders filed April 23, 1996 (File No. 000-25590).

++    Incorporated  herein by reference to Appendix A to the Company's
      definitive  Proxy  Statement  for the  1996  Annual  Meeting  of
      Shareholders filed April 23, 1996 (File No. 000-25590).


<PAGE>











                     Independent Auditors' Report

The Board of Directors
Datastream Systems, Inc.:

We  have  audited  the  accompanying  consolidated  balance  sheets  of
Datastream  Systems,  Inc. and subsidiaries as of December 31, 1996 and
1997,   and  the  related   consolidated   statements  of   operations,
stockholders'  equity,  and cash  flows  for  each of the  years in the
three-year   period  ended  December  31,  1997.   These   consolidated
financial   statements   are  the   responsibility   of  the  Company's
management.  Our  responsibility  is to  express  an  opinion  on these
consolidated financial statements 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 Datastream Systems,  Inc. and subsidiaries,  as of December
31, 1996 and 1997,  and the results of their  operations and their cash
flows for each of the years in the  three-year  period  ended  December
31, 1997, in conformity with generally accepted accounting principles.




Greenville, South Carolina
January 23, 1998


<PAGE>
               DATASTREAM SYSTEMS, INC. AND SUBSIDIARIES

                      Consolidated Balance Sheets

                      December 31, 1996 and 1997

            Assets                                    1996      1997
Current assets:                                       ----      ----
   Cash and cash equivalents                     $ 6,315,719   2,409,387
   Accounts receivable, net of allowance
    for doubtful accounts of $835,000 and
    $1,589,910 in 1996 and 1997, respectively     11,725,928  21,968,539
   Unbilled receivables                            1,438,230   2,271,375
   Investments                                    13,011,856   9,735,585
   Prepaid expenses                                  586,647     614,447
   Inventories                                       324,018     369,486
   Deferred income taxes                             395,000     796,000
   Other assets                                      745,093     619,448
                                                  ----------  ----------
        Total current assets                      34,542,491  38,784,267

Investments                                        4,547,220   6,637,286
Property and equipment, net                        8,692,323  10,166,101
Goodwill, net of accumulated amortization
    of $1,091,001 in 1997                          7,636,748   6,545,747
Capitalized software development costs, net of
    accumulated amortization of $1,197,177 and
    $2,676,132 in 1996 and 1997, respectively      2,158,436   2,963,842
                                                ------------  ----------
        Total assets                            $ 57,577,218  65,097,243
                                                ============  ==========
   Liabilities and Stockholders' Equity

Current liabilities:
   Accounts payable                                4,403,205   2,696,240
   Other accrued liabilities                       9,139,078   4,135,258
   Income taxes payable                              743,707   2,816,800
   Current portion of long-term debt               1,507,274     346,197
   Unearned revenue                                5,116,007   6,499,953
                                                  ----------  ----------
      Total current liabilities                   20,909,271  16,494,448

Long-term debt, less current portion               2,892,743     603,098
Deferred income taxes                                650,000     892,000
                                                  ----------  ----------
      Total liabilities                           24,452,014  17,989,546
                                                  ==========  ==========
Commitments

Stockholders' equity:
   Preferred stock $1 par value, 1,000,000
      shares authorized; none issued                      -           -
   Common stock, $.01 par value, 40,000,000
      shares authorized; 18,253,578 and
      18,585,518 shares issued and outstanding at
      December 31, 1996 and 1997, respectively       182,536     185,855
   Additional paid-in capital                     55,756,166  58,049,212
   Accumulated deficit                           (22,813,498)(11,375,601)
   Foreign currency translation adjustment                -      217,275
   Unrealized gain on securities available-for-sale       -       30,956
                                                  ----------  ----------
      Total stockholders' equity                  33,125,204  47,107,697
                                                  ----------  ----------
      Total liabilities and stockholders' equity $57,577,218  65,097,243
                                                  ==========  ==========

See accompanying notes to consolidated financial statements.

<PAGE>
               DATASTREAM SYSTEMS, INC. AND SUBSIDIARIES

                 Consolidated Statements of Operations

             Years ended December 31, 1995, 1996 and 1997


                                        1995        1996        1997
Revenues:                               ----        ----        ----
   Product                         $ 9,342,978  14,018,478  31,174,408
   Applications engineering          6,659,998  12,325,593  26,437,697
   Support                           4,343,008   6,122,332  12,156,190
                                    ----------  ----------  ----------
      Total revenues                20,345,984  32,466,403  69,768,295
                                    ----------  ----------  ----------
Cost of revenues:
   Cost of product revenues          1,135,779   1,879,258   3,132,996
   Cost of applications
     engineering revenues            3,382,730   6,729,072  15,160,409
   Cost of support revenues            699,544   1,094,745   3,837,565
   Write-off of capitalized software     -       1,803,637       -
                                     ---------  ----------  ----------
        Total cost of revenues       5,218,053  11,506,712  22,130,970
                                     ---------  ----------  ----------
      Gross profit                  15,127,931  20,959,691  47,637,325

Operating expenses:
   Sales and marketing              5,216,009   9,398,675   18,616,981
   Product development              1,740,895   1,390,325    4,364,234
   General and administrative       2,259,172   3,369,338    8,094,762
   Write-off of in-process
     research and development            -     33,600,000         -
                                    ---------  ----------   ----------
      Total operating expenses      9,216,076  47,758,338   31,075,977
                                    ---------  ----------   ----------
      Operating income (loss)       5,911,855 (26,798,647)  16,561,348

Other income (expense):
   Interest and other income        1,181,974   2,374,158    1,220,256
   Interest expense                    (5,770)     (4,240)    (233,395)
                                    ---------   ---------    ---------
      Net other income              1,176,204   2,369,918      986,861
                                    ---------   ---------    ---------
      Income (loss) before
        income taxes                7,088,059 (24,428,729)  17,548,209

Income taxes                        2,742,000   3,581,000    6,110,312
                                    ---------  ----------   ----------
      Net income (loss)           $ 4,346,059 (28,009,729)  11,437,897
                                    ========= ===========   ==========
      Basic net income (loss)
        per share                       $ .33       (1.65)         .62
                                    ========= ===========   ==========
      Diluted net income (loss)
        per share                       $ .30       (1.58)         .59
                                    ========= ===========   ==========
      Basic weighted average
        number of common and common
        equivalent shares
        outstanding                13,004,474  16,977,134   18,396,920
                                   ==========  ==========   ==========
      Diluted weighted average
        number of common and
        common equivalent shares
        outstanding                14,365,756  17,685,522   19,245,948
                                   ==========  ==========   ==========
See accompanying notes to consolidated financial statements.

<PAGE>
<TABLE>
                                                    DATASTREAM SYSTEMS, INC. AND SUBSIDIARIES


                                                 Consolidated Statements of Stockholders' Equity

                                                   Years Ended December 31, 1995, 1996 and 1997
<CAPTION>
                                                                                 Unrealized net
                                                                       Foreign   Gain (Loss) on
                                               Additional  Retained   Currency   Investments        Total
                                     Common     Paid-In    Earnings  Translation   Available     Stockholders'
                                      Stock     Capital    (Deficit) Adjustment  for Sale, Net      Equity
                                      -----     -------     -------  ----------  -------------      ------
<S>                                <C>       <C>       <C>            <C>           <C>         <C>
Balance at December 31, 1994         69,400       -         850,172       -         (3,487)         916,085
   Net income                           -         -       4,346,059       -            -          4,346,059
   Unrealized net gain on
     investments available for
     sale, net of income tax            -         -             -         -          3,487            3,487
   Issuance of common shares in
     initial public offering, net
     of offering costs of $387,787   40,000  13,520,213         -         -             -        13,560,213
   Exercise of redeemable stock
     warrants                        34,424   2,031,125         -         -             -         2,065,549
   Issuance of common shares in
     public offering, net of
      offering costs of $225,064     24,286  25,118,362         -         -             -        25,142,648
                                     ------  ----------   ---------    ------       -------      ----------
Balance at December 31, 1995        168,110  40,669,700   5,196,231       -             -        46,034,041
   Net loss                             -           -   (28,009,729)      -             -       (28,009,729)
   Exercise of stock options          2,328     920,762         -         -             -           923,090
   Tax benefit of options
     exercised                          -       115,000         -         -             -           115,000
   Stock issued for Employee
     Stock Purchase Plan                 76      62,726         -         -             -            62,802
   Stock issued in acquisition       12,022  13,987,978         -         -             -        14,000,000
                                    -------  ----------  ----------    ------       -------      ----------
Balance at December 31, 1996        182,536  55,756,166 (22,813,498)      -             -        33,125,204
   Net income                           -           -    11,437,897       -             -        11,437,897
   Exercise of stock options          3,130   2,042,457       -           -             -         2,045,587
   Tax benefit of options
     exercised                          -       113,000       -           -             -           113,000
   Stock issue for Employee
     Stock Purchase Plan                189     137,589       -           -             -           137,778
   Unrealized gains on securities
     available-for-sale                 -           -         -           -         30,956           30,956
   Foreign currency translation
     adjustment                         -           -         -       217,275          -            217,275
                                    -------  ----------  ----------   -------       ------       ----------
Balance at December 31, 1997       $185,855  58,049,212 (11,375,601)  217,275       30,956       47,107,697
                                    =======  ==========  ==========   =======       ======       ==========
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
               DATASTREAM SYSTEMS, INC. AND SUBSIDIARIES

                 Consolidated Statements of Cash Flows

             Years ended December 31, 1995, 1996 and 1997

                                           1995        1996        1997
Cash flows from operating activities:
  Net income (loss)                    $ 4,346,059 (28,009,729) 11,437,897
  Adjustments to reconcile net income
   (loss) to net cash provided by
   operating activities:
      Depreciation                         355,263     948,460   2,285,278
      Amortization of capitalized
        software development costs         258,119     500,065   1,478,955
      Amortization of goodwill                 -           -     1,091,001
      Foreign currency translation
        adjustment                             -           -       217,275
      Accretion of investment
        discount, net                     (337,045)   (576,431)    (49,497)
      (Gain) loss on disposal of
        equipment                           54,788      19,378      45,037
      Provision for doubtful accounts      149,075     590,525     754,910
      Deferred income taxes                 44,000     (42,000)   (178,000)
      Write-off of in-process research
        and development                        -    33,600,000         -
      Write-off of capitalized software        -     1,803,637         -
      Changes in operating assets and
        liabilities, net of effects of
        acquisition:
          Accounts receivable           (3,087,227) (4,420,619)(10,997,521)
          Unbilled receivables                 -           -      (833,145)
          Prepaid expenses                (103,687)   (190,238)    (27,800)
          Inventories                     (171,258)    (73,087)    (45,468)
          Other assets                    (375,145)    (23,836)    125,645
          Accounts payable                  78,944     642,429  (1,706,965)
          Other accrued liabilities        336,179     529,394  (5,003,820)
          Income taxes payable              25,843    (242,082)  2,186,093
          Unearned revenue               1,233,298   1,117,436   1,383,946
            Net cash provided by         ---------   ---------   ---------
            operating activities         2,807,206   6,173,302   2,163,821
                                         =========   =========   =========
Cash flows from investing activities:
  Purchase of investments              (41,105,386)(36,079,529)(12,317,057)
  Proceeds from sale and maturities
    of investments                       4,801,648  56,751,813  13,602,714
  Additions to property and equipment   (4,647,262) (3,765,805) (3,862,735)
  Proceeds from the sale of equipment        6,205       9,135      58,643
  Capitalized software development costs  (541,953) (2,609,521) (2,284,361)
  Cash paid for acquisition, net of
    cash acquired                              -   (16,428,660)        -
            Net cash used in investing  ----------   ---------   ---------
            activities                 (41,486,748) (2,122,567) (4,802,796)
                                        ==========   =========   =========
Cash flows from financing activities:
  Net proceeds from initial public
     offering of common stock           13,560,213         -           -
  Net proceeds from secondary public
     offering of stock                  25,142,648         -           -
  Proceeds from exercise of stock
     warrants                               35,463         -           -
  Proceeds from exercise of stock
     options                                   -     1,038,090   2,045,587
  Proceeds for stock issuances under
     employee purchase plan                    -        62,802     137,778
  Principal payments on long-term debt     (26,667)    (20,000) (3,450,722)
            Net cash provided by
           (used in) financing          ----------   ---------   ---------
            activities                  38,711,657   1,080,892  (1,267,357)
                                        ==========   =========   =========
Net increase in cash and cash
   equivalents                              32,115   5,131,627  (3,906,332)
Cash and cash equivalents at beginning
   of year                               1,151,977   1,184,092   6,315,719
Cash and cash equivalents at end       -----------   ---------   ---------
   of year                             $ 1,184,092   6,315,719   2,409,387
                                       ===========   =========   =========

Supplemental disclosures of cash flow information:
  Cash paid during the year for:
    Interest                            $    5,770       4,240     379,553
    Income taxes                       $ 2,800,520   3,750,082   3,806,534

Supplemental disclosure of non-cash activities:
  Unrealized net gain (loss) on
  investments available for sale,
  net of income taxes                  $     3,487         -        30,956


See accompanying notes to consolidated financial statements.

<PAGE>



               DATASTREAM SYSTEMS, INC. AND SUBSIDIARIES

              Notes to Consolidated Financial Statements



(1) Summary of Significant Accounting Policies

    (a)Organization and Basis of Presentation

       Datastream  Systems,   Inc.  (the  "Company"  or  "Datastream")
       develops,  markets,  sells and  supports  Microsoft  and Oracle
       based   software   products  for  the   industrial   automation
       market.   These  products  serve  the  desktop,   file  server,
       client-server  and  enterprise-wide   networking  environments.
       Datastream's  software  enables  users to  schedule  preventive
       maintenance,  record equipment maintenance histories,  organize
       and control  spare parts  inventories,  schedule  equipment and
       parts  inventory  purchases and deploy  maintenance  personnel.
       In  addition  to its U.S.  operations,  the  Company has direct
       sales or  distribution  offices in the Canada,  United Kingdom,
       The   Netherlands,    France,   Mexico,   Brazil,    Argentina,
       Venezuela, Peru, Malaysia, Australia and South Africa.

        On December 31,  1996,  the Company  acquired SQL Group,  B.V.
        (SQL) (see note 2).

    (b)Consolidation Policy

       The consolidated  financial  statements include the accounts of
       Datastream  Systems,  Inc. and its wholly  owned  subsidiaries.
       All significant  intercompany  accounts and  transactions  have
       been eliminated.

    (c)Revenue Recognition

       The Company's  revenue,  which  consists  primarily of fees for
       product  sales,   applications   engineering  and  support,  is
       recognized  in  accordance  with AICPA  Statement  of  Position
       91-1,   "Software   Revenue   Recognition"   as  there  are  no
       significant  vendor  obligations  remaining  and  collection of
       the related  receivable is probable.  The Company  accounts for
       insignificant  vendor  obligations  by accruing  such costs and
       recognizing   them  ratably  on  completion   of   performance.
       Revenue from product sales is  recognized  upon shipment of the
       product and fulfillment of acceptance  terms,  if any.  Revenue
       from  applications  engineering  is recorded  as  services  are
       provided.  Revenue  from  support is  deferred  and  recognized
       ratably  over the terms of the  support  agreements,  generally
       one year.  In  instances  where the  support is  included  with
       the product sale,  the support fee is unbundled and  recognized
       ratably over the support period.

       The  Company   continually   evaluates  its  obligations   with
       respect  to   warranties,   returns  and   refunds.   Based  on
       historical  trends  and  management's   evaluation  of  current
       conditions,  any  potential  obligations  that are  inherent in
       the accounts  receivable  balance are  adequately  provided for
       through the  allowance for doubtful  accounts.  The Company may
       in  certain  circumstances  grant  discounts  when  a  purchase
       order  is  received.   The  discounts  are  recognized  in  the
       product revenue at the time of shipment.

<PAGE>
(1) Summary of Significant Accounting Policies, Continued

    (d)Cash Equivalents

       The Company  considers  all highly liquid  investments  with an
       original   maturity  of  three   months  or  less  to  be  cash
       equivalents.

     (e)   Concentration of Credit Risk

       Financial  instruments which potentially  expose the Company to
       concentrations  of  credit  risk  consist  primarily  of  trade
       accounts   receivable.   The   Company   has  not   experienced
       significant  losses  related  to  receivables  from  individual
       customers or groups of  customers  in a particular  industry or
       geographic   area.   As  a  result,   management   believes  no
       additional   credit  risk  beyond  the  amounts   provided  for
       estimated   future   collection   losses  is  inherent  in  the
       Company's accounts receivable.

    (f)Investment Securities

       The Company  classifies  its debt and equity  securities in one
       of   three   categories:   trading,   available-for-sale,    or
       held-to-maturity.   Trading  securities  are  bought  and  held
       principally  for  the  purpose  of  selling  them  in the  near
       term.  Held-to-maturity  securities  are  those  securities  in
       which the  Company  has the  ability  and  intent to hold until
       maturity.  All other  securities  not  included  in  trading or
       held-to-maturity are classified as available-for-sale.

        Trading  and  available-for-sale  securities  are  recorded at
        fair  value.   Held-to-maturity  securities  are  recorded  at
        amortized  cost,  adjusted for the  amortization  or accretion
        of  premiums  or  discounts.   Unrealized  holding  gains  and
        losses  on  trading   securities  are  included  in  earnings.
        Unrealized  holding  gains and losses,  net of the related tax
        effect,  on  available-for-sale  securities  are excluded from
        earnings  and  are   reported  as  a  separate   component  of
        stockholders'   equity  until  realized.   Equity   securities
        without  readily  determinable  fair  values are  recorded  at
        cost.   Realized   gains   and   losses   from   the  sale  of
        available-for-sale  securities  are  determined  on a specific
        identification basis.

        A decline in the  market  value of any  available-for-sale  or
        held-to-maturity  security  below  cost  that is  deemed to be
        other  than  temporary  results  in a  reduction  in  carrying
        amount to fair value.  The  impairment  is charged to earnings
        and a new cost basis for the  security  established.  Premiums
        and  discounts  are amortized or accreted over the life of the
        related  held-to-maturity  security as an  adjustment to yield
        using the  effective  interest  method.  Dividend and interest
        income are recognized when earned.


<PAGE>
(1) Summary of Significant Accounting Policies, Continued

     (g)   Inventories

       Inventories   are  stated  at  the  lower  of  cost  (first-in,
       first-out)   basis   or   market   (net   realizable    value).
       Substantially  all  of  the  Company's  inventory  is  software
       related product.

    (h)Property and Equipment

       Property and  equipment are recorded at cost.  Depreciation  is
       computed  under the  straight-line  method  over the  estimated
       useful   lives   for   financial   reporting   and   under  the
       accelerated  and modified  accelerated  cost  recovery  systems
       for  income  tax   reporting.   The   estimated   useful  lives
       generally assigned are as follows:

         Building                           40 years
         Computer equipment             3 to 5 years
         Furniture and fixtures              5 years
         Automobiles                         5 years

    (i)Capitalized Software Development Costs

       Capitalized  software  development costs consist principally of
       salaries  and certain  other  expenses  related to  development
       and  modifications of software  products and are capitalized in
       accordance  with  the  provisions  of  Statement  of  Financial
       Accounting  Standards  No.  86,  "Accounting  for the  Costs of
       Computer   Software   to  be   Sold,   Leased,   or   Otherwise
       Marketed".  Capitalization  of  such  costs  begins  only  upon
       establishment  of technological  feasibility,  which is defined
       by  the  Company  as  completion  of a  working  model  of  the
       software and ends when the  resulting  product is available for
       sale.

       Amortization  of  capitalized  software  development  costs  is
       provided  on a  product-by-product  basis and  begins  when the
       product  is  available  for sale.  Annual  amortization  is the
       greater  of the  amount  computed  using the  ratio of  current
       product  revenue  to  the  total  of  current  and  anticipated
       product revenue or the  straight-line  basis over the remaining
       estimated  economic  life of the  software,  which  is not more
       than   three   years.    The   ongoing    assessment   of   the
       realizability  of these costs  requires  considerable  judgment
       as to anticipated  future product  revenues,  related estimated
       economic   life,   and   changes  in  hardware   and   software
       technology.  Amortization  of  software  development  costs  is
       included  in  cost  of  product  revenues  in the  accompanying
       statements of income.

<PAGE>
(1) Summary of Significant Accounting Policies, Continued

       During the years  ended  December  1995,  1996 and 1997,  total
       costs   incurred   (excluding   amortization   of   capitalized
       software    development   costs)   for   software   development
       activities   were   $2,314,003,   $3,999,845  and   $6,648,595,
       respectively;  total  capitalized  software  development  costs
       were $573,108,  $2,609,520 and  $2,284,361,  respectively;  and
       amortization  of capitalized  costs was $258,119,  $500,065 and
       $1,478,955, respectively.

       In  connection  with the  acquisition  of SQL in 1996 (see note
       2),  the  Company  acquired   software   technology  valued  at
       $900,000.  In addition,  the Company  wrote-off  $1,803,637  of
       its  existing   capitalized   software  in  1996  which  became
       obsolete as a result of the SQL acquisition.

    (j)Goodwill

       Goodwill  resulting  from the  acquisition  of SQL (see note 2)
       is being  amortized  using the  straight-line  method  over its
       estimated useful life of seven years.

       The  recoverability  of goodwill is periodically  reviewed when
       events or circumstances  warrant.  Impairment,  determined when
       the carrying  value of an asset  cannot be  recovered  over its
       remaining  useful  life from  undiscounted  future  cash flows,
       will be  measured  and  recognized  when the fair value is less
       than the asset's carrying amounts.

    (k)Stock Option Plan

       Statement of Financial  Accounting  Standards No. 123 allows an
       entity  to apply  the  provisions  of APB  Opinion  No.  25 and
       provide  pro forma net income  and,  if  earnings  per share is
       presented,   pro  forma  earnings  per  share  disclosures  for
       employee  stock option  grants made in 1995 and future years as
       if the  fair-value-based  method  defined in Statement  No. 123
       had been  applied.  The  Company  has  elected to  continue  to
       apply the  provisions  of APB  Opinion  No. 25 and  provide the
       pro forma disclosure provisions of Statement No. 123.

     (l)   Income Taxes

       The  Company   records   income   taxes  using  the  asset  and
       liability  method.  Deferred  tax  assets and  liabilities  are
       recognized  for the future  tax  consequences  attributable  to
       differences  between the financial  statement  carrying amounts
       of existing  assets and  liabilities  and their  respective tax
       bases.   Deferred  tax  assets  and  liabilities  are  measured
       using  enacted tax rates  expected  to apply to taxable  income
       in  the  years  in  which  those   temporary   differences  are
       expected to be  recovered  or  settled.  The effect on deferred
       tax  assets  and  liabilities  of a  change  in  tax  rates  is
       recognized   in  income  in  the  period  that   includes   the
       enactment date.

<PAGE>
(1) Summary of Significant Accounting Policies, Continued

    (m)Net Income (Loss) Per Share


       During  1997,  the Company  implemented  Statement of Financial
       Accounting  Standards  No. 128,  "Earnings  Per  Share."  Basic
       net  income  (loss)  per  share is  computed  by  dividing  net
       income (loss) by the weighted  average  number of common shares
       outstanding.  Diluted  net income  (loss) per share is computed
       by dividing net income  (loss) by the weighted  average  number
       of common and  potential  common  shares  outstanding.  Diluted
       weighted  average  common and potential  common shares  include
       common  shares  and  stock  options  using the  treasury  stock
       method.   The  implementation  of  Statement  No.  128  had  no
       impact on the Company's results of operations.

     (n)   Stock Split

       Effective  January 30, 1998,  the Company's  Board of Directors
       declared a  two-for-one  stock split  effected in the form of a
       stock  dividend.  All share,  per share and conversion  amounts
       relating to common stock,  warrants and stock options  included
       in the  accompanying  financial  statements and notes have been
       restated to reflect this stock split.

    (o)Foreign Currency Translation

       The  financial  statements of  subsidiaries  outside the United
       States are generally  measured  using the local currency as the
       functional   currency.   Assets   and   liabilities   of  these
       subsidiaries  are  translated  at the rates of  exchange at the
       balance  sheet date.  Revenues and expenses are  translated  at
       the average rate of exchange during the period.

    (p)Recent Accounting Pronouncements

       In  June  1997,  the  Financial   Accounting   Standards  Board
       ("FASB")  issued  Statement of Financial  Accounting  Standards
       No.  130,  "Reporting   Comprehensive  Income"  (Statement  No.
       130).  Statement  No. 130 requires  companies to display,  with
       the  same  prominence  as  other  financial   statements,   the
       components   of   comprehensive   income.   Statement  No.  130
       requires   that  an   enterprise   classify   items   of  other
       comprehensive  income by their nature in a financial  statement
       and  display  the  accumulated  balance of other  comprehensive
       income   separately  from  retained   earnings  and  additional
       paid-in  capital  in  the  equity  section  of a  statement  of
       financial   position.   Statement  No.  130  is  effective  for
       fiscal    years    beginning    after    December   15,   1997.
       Reclassification  of financial  statements for earlier  periods
       provided for  comparative  purposes is required.  The Company's
       financial   statements   will   include   the   disclosure   of
       comprehensive  income  in  accordance  with the  provisions  of
       Statement No. 130 beginning the first quarter of 1998.

<PAGE>
(1) Summary of Significant Accounting Policies, Continued

       In  June  1997,   the  FASB  issued   Statement   of  Financial
       Accounting  Standards No. 131,  "Disclosures  about Segments of
       an  Enterprise  and Related  Information" (Statement  No. 131).
       Statement  No.  131  requires   that  an  enterprise   disclose
       certain  information about operating  segments and is effective
       for financial  statements for periods  beginning after December
       15, 1997.

       In October 1997, the Accounting  Standards  Executive Committee
       issued   Statement   of  Position   97-2,   "Software   Revenue
       Recognition"  (SOP 97-2).  SOP 97-2 is effective  for financial
       statements  for  fiscal  years  beginning  after  December  15,
       1997.  The Company  does not expect  that  adoption of SOP 97-2
       will significantly affect its results of operations.

    (q)Use of Estimates

       The  preparation  of financial  statements in  conformity  with
       generally accepted  accounting  principles  requires management
       to make  estimates  and  assumptions  that affect the  reported
       amounts   of  assets  and   liabilities   and   disclosure   of
       contingent   assets  and   liabilities   at  the  date  of  the
       financial  statements and the reported  amounts of revenues and
       expenses during the reporting  period  including  estimates and
       assumptions  for  allowance  for doubtful  accounts,  allowance
       for  deferred  tax assets,  and useful  lives of  goodwill  and
       capitalized  software  development costs.  Actual results could
       differ from those estimates.


<PAGE>
(2) Acquisition

    On December  31,  1996,  the Company  acquired  all of the capital
    stock and equity  interests of SQL for a total  purchase  price of
    $42.1  million.  The purchase  price  consisted of  $17,000,000 in
    cash,  $14,000,000  of common stock  (1,202,210  shares  valued at
    $11.31 per share) and the  assumption of net tangible  liabilities
    and costs  incurred of $11.1  million.  At  December  31, 1996 and
    1997,  an additional  $3 million of common stock  (300,552  shares
    at  $11.31  per  share)  was  being  held in  escrow  pending  the
    resolution  of  certain  matters.  The  value of any  subsequently
    issued  shares will be allocated to goodwill  and  amortized  over
    its  remaining  useful  life.  SQL is a  computerized  maintenance
    management  software  vendor in Europe.  The  acquisition has been
    accounted for using the purchase  method.  The purchase  price has
    been  allocated to the tangible and  intangible  assets  purchased
    and the  liabilities  assumed based on the fair values on the date
    of acquisition as follows:

       Total purchase price                             $ 31,000,000
       Net tangible liabilities assumed and               ----------
       costs incurred:
         Current assets                                    5,851,534
         Furniture, fixtures, and equipment                  606,428
         Current liabilities                             (11,668,049)
         Acquisition costs                                  (965,000)
         Acquisition related liabilities                  (1,625,000)
         Long-term debt, less current portion             (3,336,661)
                                                         ------------
                                                         (11,136,748)
                                                         ------------
       Excess cost over fair value of net tangible
         liabilities assumed and costs incurred         $ 42,136,748
                                                         ===========
        Excess cost over fair-value of net tangible
         liabilities assumed has been allocated to:
            Software technology                         $    900,000
            Goodwill                                       7,636,748
            In-process research and development           33,600,000
                                                        ------------
                                                        $ 42,136,748
                                                        ============

    The   in-process   research   and   development   of   $33,600,000
    represents  the fair  value  of  in-process  development  projects
    that  had  not  reached  technological   feasibility  and  had  no
    probable  alternative  future uses,  which the Company expensed at
    the date of the acquisition.

    In  conjunction  with  the   acquisition,   the  Company  recorded
    acquisition  related  liabilities of  approximately  $1,625,000 to
    cover the  anticipated  cost of combining  its  existing  business
    with the business of SQL.

<PAGE>
(2) Acquisition, Continued

    During  1997,  the  Company  paid   approximately   $1,320,000  to
    involuntarily   terminate  and  relocate   employees  of  SQL  and
    approximately  $305,000 to exit  activities  of SQL in Germany and
    Italy.

    The  following  unaudited  pro  forma  information   presents  the
    results   of   operations   of   the   Company   as   though   the
    aforementioned  acquisition  occurred as of the  beginning  of the
    year  in  which   the   acquisition   occurred.   The  pro   forma
    adjustments  (i) reflect  increased  amortization  expense related
    to the  acquired  assets and reduced  interest  income  related to
    investments  used as part of the  consideration,  and (ii) exclude
    the   non-recurring    charges   for   in-process   research   and
    development and the write-off of capitalized software.

                                                   1996
                                                   ----
       Total revenue                          $49,216,000
       Operating loss                            (764,000)
       Net loss                                (2,910,000)
       Basic and diluted net loss per share          (.15)


(3) Investment Securities

    The amortized  cost,  gross  unrealized  gains,  gross  unrealized
    losses and market value of  investment  securities at December 31,
    1996 and 1997 are as follows:

                                             Gross      Gross    Estimated
                                Amortized Unrealized  Unrealized   Fair
                                  Cost       Gains      Losses     Value
   December 31, 1996              ----       -----      ------     -----

   Held-to-maturity:
     U.S. Treasury Securities $17,559,076   176,211    (4,668)  17,730,619
                              ===========   =======    =======  ==========
   December 31, 1997

   Available-for-sale:
     U.S. Treasury Securities $14,288,170    51,862    (1,905)  14,338,127
   Cost basis:
     Equity Securities          2,034,744       -         -      2,034,744
                               ----------   ------    -------  -----------
                             $ 16,322,914   51,862    (1,905)   16,372,871
                               ==========   ======    =======  ===========

<PAGE>
(3) Investment Securities, Continued

    In December  1996,  the Company  sold  investments  classified  as
    held-to-maturity   with  an  amortized  cost  of  $10,155,487  and
    recognized  a gain of  $24,218.  The  proceeds  from this sale and
    the   proceeds   from   maturing   held-to-maturity    investments
    represented the cash  consideration for the Company's  acquisition
    of SQL (see note 2).

    Proceeds    from    the    sale    of    investment     securities
    available-for-sale   during  1997  were  approximately   $670,000,
    which approximated amortized costs.

    During 1997,  the Company  entered into a preferred  stock purchase
    agreement  with an unrelated  software  company  (the  "Investee").
    Under the agreement,  the Company  purchased  221,910 shares of the
    Investee's  convertible  preferred stock for a total purchase price
    of  approximately  $2.0 million.  The investment is being accounted
    for  under  the  cost  method  and  is   included  in   non-current
    investments in the  accompanying  balance sheet.  The fair value of
    the shares is not readily  determinable,  therefore,  no unrealized
    gains or losses have been recorded.

    The  amortized  cost  and  market  value of  investment  securities
    held-to-maturity  at December 31, 1997, by  contractual  maturities
    are shown below:
                                                  Amortized   Market
                                                    Cost       Value
                                                    ----       -----
       Due in one year or less                 $ 9,736,141  9,735,585
       Due after one year through five years     4,552,029  4,602,542
       Equity securities                         2,034,744  2,034,744
                                                ---------- ----------
                                              $ 16,322,914 16,372,871
                                                ========== ==========
 (4)  Fair Value of Financial Instruments

    The fair  value of  financial  instruments  is the amount at which
    the  instrument  could  be  exchanged  in  a  current  transaction
    between willing parties.

    At December  31, 1996 and 1997,  the  carrying  value of financial
    instruments   such  as  cash   and  cash   equivalents,   accounts
    receivable,  and accounts payable  approximated their fair values,
    based upon the short maturities of these instruments.

    The  fair  value  of the  Company's  long-term  debt is  estimated
    using  discounted  cash  flow  analysis,  based  on the  Company's
    current   incremental   borrowing   rates  for  similar  types  of
    borrowing  arrangements.  The carrying  value of such  instruments
    approximated their fair value at December 31, 1996 and 1997.

    The fair values  of investment  securities presented in note 3 are
    based on  quoted  market prices at the reporting date for those or
    similar investments.

<PAGE>
(5) Property and Equipment

    Property and equipment consisted of the following at December 31:
                                                    1996       1997
                                                    ----       ----
       Land                                    $   465,981    500,981
       Building                                  4,371,113  4,570,254
       Computer equipment                        4,719,340  7,479,403
       Furniture and fixtures                      930,226  1,358,281
                                                ---------- ----------
                                                10,486,660 13,908,919
       Accumulated depreciation                  1,794,337  3,742,818
                                                ---------- ----------
                                               $ 8,692,323 10,166,101
                                                ========== ==========

 (6)  Other Accrued Liabilities

    Other accrued liabilities consisted of the following at December 31:
                                                     1996      1997
                                                     ----      ----
       Accrued salaries and commission           $ 1,231,565 1,094,908
       Sales and payroll taxes payable             1,449,468 1,470,362
       Accrued acquisition costs                   1,373,316     -
       Acquisition related liabilities
         (see note 2)                              1,625,000     -
       Warranty reserve                            1,500,000     -
       Other accrued liabilities                   1,959,729 1,569,988
                                                   --------- ---------
                                                 $ 9,139,078 4,135,258
                                                   ========= =========
 (7)  Long-term Debt

    Long-term debt as of December 31, consists of the following:

                                                     1996      1997
       Note  payable in monthly  payments of         ----      ----
         $1,667,   plus  interest  at  prime
         plus  .5%   through   March   1998;
         collateralized by equipment            $   21,667     1,667

       Subordinated    note    payable    in
         bi-annual   payments  of  $123,750,
         plus   interest   at   7%   through
         December 2000                             765,136   371,250

<PAGE>
(7) Long-term Debt, Continued
                                                     1996      1997
                                                     ----      ----
       Subordinated  note  payable in annual
         payments    of    $97,030,     plus
         interest at 6.5%  through  December
         2002                                      870,356    563,739

       Subordinated  note  payable in annual
         payment of $48,150,  plus  interest
         at 6.5% paid in 1997                      481,513      -

       Subordinated  note  payable in annual
         payments    of    $57,320,     plus
         interest at 10% paid in 1997              515,907      -

       Subordinated  note  payable in annual
         payments of 11,465,  plus  interest
         at 10% paid in 1997                        51,591      -

       Subordinated  note  payable in annual
         payments    of    $34,394,     plus
         interest at 10% paid in 1997              171,979      -

       Note  payable in  bi-annual  payments
         of  $204,643,   plus   interest  at
         5.3% paid in 1997                       1,433,075      -

       Note  payable in annual  payments  of
         $8,598,   plus   interest  at  6.5%
         paid in 1997                               68,788      -

       Subordinated  note  payable in annual
         payments of $3,073,  plus  interest
         at 6.5% through December 2002              20,005     12,639
                                                 ---------    -------
                                                 4,400,017    949,295
            Less current portion                (1,507,274)  (346,197)
                                                 ---------    -------
       Long-term debt, less current portion    $ 2,892,743    603,098
                                                 =========    =======
<PAGE>
(7) Long-term Debt, Continued

    The  remaining  annual  maturities  of  long-term  debt in the five
    years subsequent to December 31, 1997 are as follows:

         1998                                     $ 346,197
         1999                                       223,853
         2000                                       100,103
         2001                                       100,450
         2002                                       178,692
                                                    -------
            Total                                $  949,295
                                                    =======
(8) Line of Credit

    The  Company  maintains  a  multicurrency   line  of  credit  that
    provides for  borrowings of 70% of accounts  receivable  less than
    60 days aged up to  $5,000,000.  No  borrowings  were  outstanding
    under lines of credit at December 31, 1996 and 1997.

(9) Income Taxes

    Income tax expense for the years ended December 31 is as follows:

                                          Current   Deferred    Total
       1995:
         Federal                       $ 2,346,000   47,000   2,393,000
         State                             352,000   (3,000)    349,000
         Foreign                               -        -           -
                                         ---------   ------   ---------
            Total                      $ 2,698,000   44,000   2,742,000
                                         =========   ======   =========
       1996:
         Federal                       $ 3,230,000  (30,000)  3,200,000
         State                             393,000  (12,000)    381,000
         Foreign                               -        -           -
                                         ---------   ------   ---------
            Total                      $ 3,623,000  (42,000)  3,581,000
                                         =========   ======   =========
       1997:
         Federal                       $ 4,729,219 (159,000)  4,570,219
         State                             503,000  (19,000)    484,000
         Foreign                         1,056,093      -     1,056,093
                                         ---------  -------   ---------
            Total                      $ 6,288,312 (178,000)  6,110,312
                                         =========  =======   =========
<PAGE>
(9) Income Taxes, Continued

    Income  tax  expense   differed  from  the  amounts   computed  by
    applying  the  Federal  income  tax rate of 34% as a result of the
    following:
                                           1995        1996      1997
                                           ----        ----      ----
       Computed "expected" tax
         expense (benefit)            $ 2,410,000  (8,306,000) 5,966,391
       Increase (decrease) in income
         taxes resulting from:
         State and local income taxes,
           net of Federal income tax
           benefits                       230,000     251,000    319,440
         In process research and
           development                        -    11,424,000        -
         Rate differential on foreign
           source income                      -           -     (592,453)
         Effect of graduated income
           tax rates                          -           -       75,482
         Goodwill amortization                -           -      322,364
         Other, net                       102,000     212,000     19,088
                                        ---------   ---------  ---------
       Actual tax expense             $ 2,742,000   3,581,000  6,110,312
                                        =========   =========  =========

    Deferred  income  taxes  reflect the net tax effects of  temporary
    differences   between   the   carrying   amounts   of  assets  and
    liabilities  for  financial  reporting  purposes  and the  amounts
    used  for  income  tax  purposes.  Significant  components  of the
    Company's  deferred  income  tax  assets  and  liabilities  are as
    follows:
                                                  1996       1997
       Deferred tax assets:                       ----       ----
         Net operating loss carryforwards    $1,705,000   1,891,000
         Accrued expenses and allowances        395,000     797,000
                                              ---------   ---------
       Total gross deferred tax assets        2,100,000   2,688,000
       Less valuation allowance              (1,705,000) (1,705,000)
                                              ---------   ---------
       Net deferred tax assets                 $395,000     983,000
                                              =========   =========
       Deferred tax liabilities:
         Fixed assets, principally due to
           differences in depreciation          189,000     341,000
         Software development costs
           capitalized for financial reporting  461,000     719,000
         Unrealized gain on marketable
           securities                               -        19,000
                                                -------   ---------
       Total gross deferred tax liabilities     650,000   1,079,000
                                                -------   ---------
       Net deferred tax liabilities            $255,000      96,000
                                                =======   =========

    The  valuation  allowance  for  deferred tax assets as of December
    31,  1996 and 1997 was  approximately  $1,705,000  and  relates to
    net operating loss  carryforwards of foreign  subsidiaries,  which
    at this time are  uncertain of recovery.  Subsequently  recognized
    tax  benefits  relating to the  valuation  allowance  for deferred
    tax assets as of December  31, 1997 will be  allocated to goodwill
    and other noncurrent intangible assets.

    At  December  31,  1997  the  Company  has  net   operating   loss
    carryforwards  for foreign  income tax  purposes of  approximately
    $4,800,000.

<PAGE>
(10)  Employee Savings and Retirement Plan

    Effective  September  1, 1992,  the Company  established  a 401(k)
    Retirement  Plan  under  Section  401(k) of the  Internal  Revenue
    Code.  The  Plan  is  funded  in  part  from  employee   voluntary
    contributions  with the Company's  contribution  equal to one-half
    of the  employee's  contribution  up to 3% of their  compensation.
    The Plan provides for voluntary  employee  contributions  of up to
    15% of their total compensation.

    The  Company's  contributions  to the Plan  totaled  approximately
    $79,000,   $135,000,   and  $238,000  in  1995,   1996  and  1997,
    respectively.

 (11) Stock Compensation Plans

    1995 Stock Option Plan

    On  September  12,  1995,  the Company  amended and  restated  the
    Datastream  Systems,  Inc.  1995  Stock  Option  Plan  (the  "1995
    Plan")  to   provide   for  the  grant  of  both   incentive   and
    non-qualified  options to purchase up to  2,000,000  shares of the
    Company's  common  stock.  On December  26,  1996,  the  Company's
    Board of Director's  authorized an additional  1,000,000 shares to
    be added to the  2,000,000  share limit  available  under the 1995
    Plan,  subject to  stockholder  approval.  Such  options will vest
    incrementally  over a period of one to five years and will  expire
    either  five or ten  years  from the date of grant,  depending  on
    the terms of the  option.  Options  are not to be  granted at less
    than the fair market value of the  underlying  shares at the grant
    date.  Incentive  options  granted to a participant who is an over
    10%  owner  shall  not be  granted  at less  than 110% of the fair
    market value of the underlying shares at the grant date.

    A  summary  of  activity  in the  1995  Plan  during  the  periods
    indicated is as follows:

                                          Number of Weighted-Average
                                            Shares   Exercise Price
       Stock options outstanding:

         Balance at December 31, 1995      1,640,000   $  5.86
         Granted                            308,734      12.32
         Exercised                         (232,814)      3.98
         Forfeited                          (97,712)      7.55

         Balance at December 31, 1996      1,618,208      7.06

         Granted                           1,651,804      7.86
         Exercised                         (313,018)      6.57
         Forfeited                         (172,334)      8.52

         Balance at December 31, 1997      2,784,660  $   7.50

<PAGE>
(11)  Stock Compensation Plans, Continued

    The following  table  summarizes  information  about stock options
    outstanding under the 1995 Plan at December 31, 1997:
                         Options outstanding    Options exercisable
                       ----------------------- ---------------------
                              Weighted Average             Weighted -
                                  Remaining                 Average
       Range of        Number    Contractual     Number    Exercise
    Exercise Prices  outstanding     Life      Exercisable   Price
    ---------------  -----------     ----      -----------   -----
    $1.93  -  3.85    494,276        7.1        237,608      3.75
     3.85  -  5.77    100,000        2.1         40,000      4.13
     5.77  -  7.70    668,508        8.6          4,165      7.31
     7.70  -  9.63  1,342,284        8.8        248,523      9.44
     9.63  - 11.55     21,624        5.9          8,303     10.01
    11.55  - 13.48    135,968        8.6         78,136     12.12
    13.48  - 15.40     22,000        8.8         19,334     15.25
                    ---------                   -------      ----
                    2,784,660                   636,069      7.48
                    =========                   =======      ====

    The  per  share  weighted-average  fair  value  of  stock  options
    granted  under  the 1995 Plan  during  1996 and 1997 was $5.12 and
    $6.33   on  the   date  of   grant   using   the   Black   Scholes
    option-pricing   model   with   the   following   weighted-average
    assumptions:  1996 -  expected  dividend  yield  of  0%,  expected
    volatility  of 62.41%,  risk-free  interest rate of 7.01% , and an
    expected life of 10 years;  1997 - expected  dividend yield of 0%,
    expected  volatility of 85.07%,  risk-free interest rate of 6.55%,
    and an expected life of 10 years.

    Stock Option Plan for Directors

    In February  1995, the Company  established  the Stock Option Plan
    for  Directors  (the  "Directors  Plan")  which  provides  for the
    grant of  non-qualified  stock  options to  purchase up to 200,000
    shares of Common Stock to directors  who are not  employees of the
    Company.   Under  the  Plan,   eligible  directors   automatically
    receive  options to purchase,  at the fair market value of a share
    on the date of grant,  (i) 9,000  shares of Common  Stock upon the
    commencement  of  their  service  as a  director  and  (ii)  2,000
    shares of Common  Stock  annually in  connection  with each annual
    meeting   of   stockholders.   Automatic   grants  of  options  to
    purchase  9,000  shares  of common  stock at $3.75 per share  were
    made to each of the Company's four  non-management  directors upon
    consummation  of the Company's  initial public  offering (see note
    13).

<PAGE>
(11)  Stock Compensation Plans, Continued

    A summary of  activity in the  Director's  Plan during the periods
    indicated are as follows:

                                            Number ofWeighted-Average
                                             Shares  Exercise Price
       Stock options outstanding:

         Balance of December 31, 1995        36,000       3.75
         Granted                              4,000       9.75
         Exercised                           (9,000)      3.75
                                             ------       ----
         Balance at December 31, 1996        31,000       4.52
         Granted                              8,000       9.56
         Exercised                            -             -
                                             ------       ----
         Balance at December 31, 1997        39,000    $  5.56
                                             ======       ====

    The following table summarizes information about stock options
    outstanding under the Director's Plan at December 31, 1997:

                       Options outstanding     Options exercisable
                    ------------------------- ---------------------
                             Weighted Average             Weighted -
                                 Remaining                  Average
       Range of       Number    Contractual     Number     Exercise
    Exercise Prices outstanding    Life       Exercisable   Price
    --------------- -----------    ----       -----------   -----
  $ 3.75             27,000        7.1 years   27,000      $ 3.75
    9.56 - 9.75      12,000        8.7          4,000        9.75
    3.75 - 9.75      39,000        7.6         31,000        4.52

    No options were exercisable at December 31, 1995.

    The  per  share  weighted-average  fair  value  of  stock  options
    granted under the  Director's  Plan during 1996 and 1997 was $3.37
    and  $5.31  on  the  date  of  grant   using  the  Black   Scholes
    option-pricing   model   with   the   following   weighted-average
    assumptions:  1996 -  expected  dividend  yield  of  0%,  expected
    volatility  of 62.41%,  risk-free  interest rate of 7.56% , and an
    expected life of 10 years;  1997 - expected  dividend yield of 0%,
    expected  volatility of 85.07%,  risk-free interest rate of 7.24%,
    and an expected life of 10 years.


<PAGE>
(11)  Stock Compensation Plans, Continued

    Employee Stock Purchase Plan

    On September  12, 1995,  the Company  established  the  Datastream
    Systems,   Inc.   Employee  Stock  Purchase  Plan  (the  "Purchase
    Plan").  The  Purchase  Plan permits  eligible  employees to elect
    to  contribute  up to 15% of their  regular  compensation  through
    payroll  deductions,  toward the  purchase of common  stock at 85%
    of the fair  market  value of a share on either the date the right
    is  granted  (the  first day of each  semi-annual  period)  or the
    date it is exercised  (the last day of such period),  whichever is
    lower.  The  Purchase  Plan is intended to comply with Section 423
    of the  Internal  Revenue Code of 1986,  as amended.  The Board of
    Directors has reserved  200,000  shares of common stock for future
    issuance  pursuant  to the  Purchase  Plan.  Under the  Plan,  the
    Company   sold  7,578  and   18,924   shares  in  1996  and  1997,
    respectively.

    Under  Statement  No. 123,  compensation  expense for the Purchase
    Plan is determined  based on the discount  percentage at which the
    stock is purchased.

    The  Company  applies APB  Opinion  No. 25 in  accounting  for its
    three  Plans  and,  accordingly,  no  compensation  cost  has been
    recognized  for its stock  options  or for stock  purchased  under
    the Purchase  Plan in the  financial  statements.  Had the Company
    determined  compensation  cost  based  on the  fair  value  at the
    grant date for stock  options or based on the discount  percentage
    under the Purchase  Plan under  Statement  No. 123, the  Company's
    net  income  would  have been  reduced  to the pro  forma  amounts
    indicated below:

                                               1996          1997
                                               ----          ----
        Net income (loss)   As reported   $(28,009,729)   11,437,897
                            Pro forma      (29,807,110)    6,422,066

      Basic:
        Net income (loss)   As reported     $ (1.65)          .62
           per share        Pro forma         (1.76)          .35

      Diluted:
        Net income (loss)   As reported      $(1.58)          .59
           per share        Pro forma         (1.69)          .33

    Pro forma net income  reflects  options  granted in 1995, 1996 and
    1997.  Compensation  cost  related  to the 1995 Plan is  reflected
    over  the  options'  vesting  period  of one  to  five  years.  No
    options were granted prior to 1995.




<PAGE>
(12)                     Public Offerings of Common Stock

    On April 5, 1995, the Company  closed its initial public  offering
    of  6,532,000  shares of common  stock,  2,532,000  of which  were
    sold by existing  shareholders,  for $3.75 per share.  The Company
    invested  the net proceeds  from the  offering in U.S.  Government
    securities.

    On  October  4,  1995,   the  Company  closed  its  second  public
    offering of 4,000,000  shares of common stock,  2,171,340 of which
    were sold by  existing  shareholders,  for $11.13  per share.  The
    Company  invested  the net  proceeds  from  the  offering  in U.S.
    Government  securities.  In conjunction  with the second offering,
    on October  17,  1995,  the Company  closed on the  over-allotment
    option of 600,000  shares of common  stock.  The Company  invested
    the  net  proceeds   from  the   over-allotment   option  in  U.S.
    Government securities.

(13)  Leases

    As Lessee
    ---------
    The Company leases office space,  automobiles  and equipment under
    agreements  which have been  classified  as  operating  leases for
    financial reporting purposes.

    At  December  31,  1997,  the  approximate  future  minimum  lease
    payments  under  noncancelable  operating  leases  that  expire at
    various dates through 2001 are as follows:

       1998                                      $ 769,897
       1999                                        529,441
       2000                                        367,839
       2001                                        242,359
       2002                                        187,949
       Thereafter                                   87,986
                                                 ---------
                                               $ 2,185,471
                                                 =========

    Rent  expense  for the years ended  December  31,  1995,  1996 and
    1997 totaled $174,193, $307,534 and $1,367,830, respectively.

    As Lessor
    ---------
    The  Company   leases  a  portion  of  its  building  and  related
    leasehold  improvements  to outside  parties  under  noncancelable
    operating leases.

<PAGE>

(13)  Leases, Continued

    At December  31,  1997,  the  approximate  future  minimum  rental
    income under  noncancelable  operating  leases that expire through
    1998 is $219,000.

    Rental  income  (included  in  other  income  in the  accompanying
    statement  of  operations)  for the years ended  December 31, 1996
    and 1997 was  $88,415  and  $338,957,  respectively.  There was no
    rental income for the year ended December 31, 1995.

 (14) Segment and Geographic Information

    The Company  operates  principally  in one industry  segment which
    includes the  development,  marketing,  selling and  supporting of
    Microsoft and Oracle based  software  products for the  industrial
    automation market.

    The  Company's  principal  areas of  operation  include the United
    States and  Europe.  Information  about the  Company's  operations
    in different geographic locations is as follows:

                                   United
                                   States       Europe        Total
    1997:                          ------       ------        -----
         Total revenues        $52,298,576   17,469,719    69,768,295
         Operating income       11,178,505    5,382,843    16,561,348
         Identifiable assets    56,696,883    8,400,360    65,097,243

    The United States  operations  include  international  revenues of
    approximately  $8,100,000  for the year ended  December  31, 1997.
    International  revenues for the years ended  December 31, 1995 and
    1996 were approximately $2,180,000 and $4,354,000, respectively.


(15)  Reconciliation of Basic and Diluted Income (Loss) Per Share
                                                             Per Share
                                           Income    Shares    Amount
                                           ------    ------    ------
      1995:
        Basic income per share         $ 4,346,059  13,004,474    .33
        Effect of dilutive securities:                            ===
           Stock options                     -       1,361,282
                                         ---------  ----------    ---
        Diluted income per share       $ 4,346,059  14,365,756    .30
                                         =========  ==========    ===


<PAGE>
(15)  Reconciliation of Basic and Diluted Income (Loss) Per Share,
    Continued

                                                              Per Share
                                          Income     Shares     Amount
                                          ------     ------     ------
      1996:
        Basic loss per share         $ (28,009,729) 16,977,134  (1.65)
        Effect of dilutive securities:                           ====
           Stock options                     -         708,388
                                        ----------  ----------   ----
        Diluted loss per share       $ (28,009,729) 17,685,522  (1.58)
                                        ==========  ==========   ====

      1997:
        Basic income per share       $  11,437,897  18,396,920    .62
        Effect of dilutive securities:                            ===
           Stock options                     -         849,028
                                        ----------  ----------    ---
        Diluted income per share      $ 11,437,897  19,245,948    .59
                                        ==========  ==========    ===

<PAGE>


                              Datastream Systems, Inc.

                      Allowance for Doubtful Accounts Receivable






                                            Amounts
                              Balance at   Charged to           Balance at
                               Beginning    Bad Debt              End of
      Description               Of Year     Expense   Deductions    Year

Allowance for doubtful accounts receivable:

      Year ended December 31,
         1995                  $ 95,400     149,075      -         244,475
                                =======    ========   ========    ========
      Year ended December 31,
         1996                 $ 244,475     590,525      -         835,000
                                =======    ========   ========    ========
      Year ended December 31,
         1997                 $ 835,000     754,910      -       1,589,910
                                =======    ========   ========   =========



<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.

                                        Datastream Systems, Inc.


Date:  March 30, 1998                   By: /s/ Larry G. Blackwell

-----------------------------
                                            Larry G. Blackwell
                                            Chairman  of the Board,
President
                                            and Chief Executive
Officer

                               POWER OF ATTORNEY

   KNOW ALL MEN BY THESE  PRESENTS,  that each person whose  signature
appears  on  the  signature  page  to  this   Registration   Statement
constitutes  and appoints  Larry G.  Blackwell  and Daniel H. Christie
and each of them,  his true and lawful  attorneys-in-fact  and agents,
with full power of  substitution  and  resubstitution,  for him and in
his name,  place and  stead,  in any and all  capacities,  to sign any
and  all  amendments  (including  post-effective  amendments)  to this
Registration  Statement,  and to file  the  same,  with  all  exhibits
hereto,  and  other  documents  in  connection  therewith,   with  the
Securities   and   Exchange   Commission,   and   grants   unto   said
attorneys-in-fact  and  agents,  and  each of  them,  full  power  and
authority  to do and  perform  each and every act and thing  requisite
and  necessary to be done in and about the  premises,  as fully to all
intents  and  purposes  as he  might or  could  do in  person,  hereby
ratifying and  confirming all that said  attorneys-in-fact  and grants
or any of them,  or  their  or his  substitutes,  may  lawfully  do or
cause to be done by virtue hereof.

   Pursuant to the  requirements  of the  Securities  Exchange  Act of
1934,  this Report has been signed below by the  following  persons in
the capacities indicated on March 30, 1998.

               Signature                                 Title

      /s/ LARRY G. BLACKWELL           Chairman of the Board,
President and
          ------------------           Chief Executive Officer
(principal
          Larry G. Blackwell           executive officer)

      /s/ DANIEL H. CHRISTIE           Chief Financial Officer
(principal
          ------------------           financial and accounting
officer)
          Daniel H. Christie

      /s/ KENNETH D. TRACY             Director
          ------------------
          Kenneth D. Tracy

      /s/ RICHARD T. BROCK             Director
          ------------------
          Richard T. Brock

      /s/ JOHN M. STERLING, JR         Director
          ------------------
          John M. Sterling, Jr.

      /s/ IRA D. COHEN                 Director
          ------------------
          Ira D. Cohen

<PAGE>

                                 EXHIBIT INDEX

      Exhibit
      Number    Description

      2.1*      SQL Systems Group, B.V. Share Purchase Agreement.

      3.1**     Amended and Restated Certificate of Incorporation.

      3.1(a)    Amendment  to  Amended  and  Restated  Certificate  of
                Incorporation, dated January 12, 1997.

      3.2**     By-Laws.

      4.1**     See  Exhibits  3.1  and  3.2  for  provisions  of  the
                Amended and Restated  Certificate of Incorporation and
                By-Laws of the Registrant  defining  rights of holders
                of Common Stock of the Registrant.

      4.2**     Specimen Stock Certificate.

      10.1***   1995  Stock   Option  Plan  as  amended  and  restated
                through May 7, 1997.

      10.1(a)   Amendment  to 1995 Stock  Option  Plan (as amended and
                restated through May 7, 1997), dated March 13, 1998.

      10.2+     Stock  Option  Plan  for  Directors  (as  amended  and
                restated as of April 12, 1996).

      10.2(a)   Amendment  to  Stock  Option  Plan for  Directors  (as
                amended  and  restated  as of April 12,  1996),  dated
                March 13, 1998.

      10.3**    401(k) Retirement Plan of the Registrant.

      10.4++    Amended and Restated Employee Stock Purchase Plan.

      11        Statement re: Computation of Per Share Earnings.

      21        Subsidiaries of the Registrant.

      23        Consent of KPMG Peat Marwick LLP.

      24        Power of Attorney (included on signature page hereto).

      27        Financial Data Schedule.

---------------
 *    Incorporated  herein by  reference to exhibit of the same number
      to the  Company's  Current  Report on 8-K filed January 10, 1997
      (File No. 000-25590)

**    Incorporated  herein by  reference to exhibit of the same number
      in the from S-1  Registration  Statement of the Registrant  (Reg
      No. 33-89498)

***   Incorporated  herein by reference to Appendix A to the Company's
      definitive  Proxy  Statement  for the  1997  Annual  Meeting  of
      Shareholders, filed May 12, 1997 (File No. 000-25590)

+     Incorporated  herein by reference to Appendix C to the Company's
      definitive  Proxy  Statement  for the  1996  Annual  Meeting  of
      Shareholders filed April 23, 1996 (File No. 000-25590)

++    Incorporated  herein by reference to Appendix A to the Company's
      definitive  Proxy  Statement  for the  1996  Annual  Meeting  of
      Shareholders filed April 23, 1996 (File No. 000-25590)



<PAGE>
                                                EXHIBIT 3.1(a)

                        ARTICLES OF AMENDMENT
                                  TO
        THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
                                  OF
                       DATASTREAM SYSTEMS, INC.

      Pursuant  to Section  242 of the  Delaware  General  Corporation
Law,  the  undersigned  Corporation  does hereby  adopt the  following
amendment to its Amended and Restated Certificate of Incorporation:

      The first  sentence of Article IV of the  Amended  and  Restated
Certificate of  Incorporation of Datastream  Systems,  Inc. be amended
to increase  the total  authorized  capital  stock of the  Corporation
from  16,000,000 to  41,000,000,  and increase the  authorized  Common
Stock of the  Corporation  from  15,000,000  to 40,000,000 so that, as
amended, the first sentence of Article IV shall read as follows:

                                    IV.

           The  total  number of shares  of  capital  stock  which the
Corporation is authorized to issue is forty-one  million  (41,000,000)
divided into two classes as follows:

            (1)  Forty  million  (40,000,000)  shares of common stock,
             $.01 par value per share ("Common Stock"); and

            (2)  One million  (1,000,000)  shares of preferred  stock,
             $1.00 par value per share("Preferred Stock").

      The  amendment  to  the  Amended  and  Restated  Certificate  of
Incorporation  of the  Corporation  set forth  herein was duly adopted
by the Board of  Directors  of the  Corporation  on November 10, 1997,
and by the  Stockholders  of the  Corporation at a special  meeting of
the Stockholders of the Corporation held December 22, 1997.

      IN WITNESS WHEREOF,  the undersigned duly authorized  officer of
the  Corporation  has executed  these  Articles of Amendment on behalf
of the Corporation, this 22nd day of December, 1997.


                                    Datastream Systems, Inc.


                                    By:   /s/   Larry G.  Blackwell
                                          Name:  Larry G. Blackwell
                                          Title:  President and Chief
                                               Executive Officer

<PAGE>




                        EXHIBIT 10.1(a)






           FIRST AMENDMENT TO THE AMENDED AND RESTATED
         DATASTREAM SYSTEMS, INC. 1995 STOCK OPTION PLAN



      THIS  FIRST   AMENDMENT   TO  THE  AMENDED   AND   RESTATED
DATASTREAM  SYSTEMS,  INC.  1995 STOCK  OPTION PLAN (this  "First
Amendment")  is  made  effective  as of the  13th  day of  March,
1998, by Datastream  Systems,  Inc., a Delaware  corporation (the
"Company").

                      W I T N E S S E T H:

      WHEREAS,  the Company has adopted the Amended and  Restated
Datastream  Systems,  Inc. 1995 Stock Option Plan (as Amended and
Restated through May 7, 1997) (the "Plan"); and

      WHEREAS, Section 4.8 of the Plan authorizes the Board of
Directors of the Company to amend the Plan without stockholder
approval; and

      WHEREAS,  the Board of Directors of the Company now desires
to amend the Plan to permit  certain  transfers of  non-qualified
stock options granted under the Plan.

      NOW,  THEREFORE,  the  Board of  Directors  of the  Company
hereby amends the Plan as follows:



      Section  3.1.11  of  the  Plan  is  hereby  deleted  in its
entirety and replaced with the following new Section 3.1.11:

      "3.1.11   Nonassignability.   Options   shall  not  be
      transferable  or  assignable  except by will or by the
      laws of descent and  distribution.  Such Options shall
      be  exercisable,  during the  Participant's  lifetime,
      only by the Participant;  or in the event of the death
      of the Participant,  by the legal  representatives  of
      the    Participant's    estate    or   if   no   legal
      representative  has been  appointed,  by the successor
      in interest  determined under the Participant's  will.
      Notwithstanding  the two prior sentences,  however, if
      the applicable Stock Option  Agreement so provides,  a
      Participant  may  assign  all  or  any  portion  of an
      Option  granted to him that is not an incentive  stock
      option  to  (i) his  spouse  or  lineal   descendants,
      (ii) one  or more trusts for the benefit of his spouse
      or lineal  descendants,  (iii) a  partnership of which
      his  spouse  or  lineal   descendants   are  the  only
      partners   or  (iv) a  tax  exempt   organization   as
      described in  Section 501(c)(3) of the Code, as may be
      permitted under  Securities  Exchange  Commission Rule
      16b-3 as in effect  from time to time.  In that event,
      the spouse, lineal descendant,  trust,  partnership or
      tax exempt  organization  will be  entitled  to all of
      the  rights of the  Participant  with  respect  to the
      assigned portion of such Option,  and such Option will
      continue  to be  subject  to  all  of  the  terms  and
      conditions  that governed the Option during the period
      that  it  was  held  by  the  Participant;   provided,
      however,  that such  assignee  may not further  assign
      the  Option  except by will or by the laws of  descent
      and   distribution.   Any  such   assignment  will  be
      permitted  only if the  Participant  does not  receive
      any consideration  therefore.  Additionally,  in order
      for an assignment  by a  Participant  to be effective,
      (i) at least 30 days prior to the date of  assignment,
      the Participant  must notify the Company in writing of
      the date of the  assignment,  the  Option  or  portion
      thereof  to  be  assigned   and  the  name,   address,
      telephone  number  and  social  security  or  employer
      identification  number of the  assignee,  (ii) at  the
      time of assignment,  the  Participant  must execute an
      appropriate   written   agreement   that  the  Company
      provides to evidence  the  assignment  and to agree to
      remit  any  applicable  withholding  the  Company  may
      require  and  (iii) at  the  time of  assignment,  the
      assignee  pursuant  to a  written  agreement  that the
      Company  provides  must  agree to be bound by the same
      terms and  conditions  that governed the Option during
      the period it was held by the Participant."



      Section 4.6 of the Plan is hereby  deleted in its  entirety
and replaced with the following new Section 4.6:

      "4.6 Non-alienation   of   Benefits.   Other  than  as
      specifically  permitted in Section 3.1.11,  no benefit
      under  the Plan  shall be  subject  in any  manner  to
      anticipation,  alienation, sale, transfer, assignment,
      pledge,  encumbrance or charge;  and any attempt to do
      so other  than as  specifically  permitted  thereunder
      shall  be  void.  No  such  benefit  shall,  prior  to
      receipt,  be in any  manner  liable  for or subject to
      the  debts,  contracts,  liabilities,  engagements  or
      torts of the recipient."



      Section 4.7 of the Plan is hereby  deleted in its  entirety
and replaced with the following new Section 4.7:

      "4.7 Restrictions  on  Delivery  and Sale of Shares;
      Legends.  Each  Option  is  subject  to the  condition
      that if at any time the Committee,  in its discretion,
      shall  determine  that the  listing,  registration  or
      qualification  of the shares  covered  by such  Option
      upon any  securities  exchange  or under  any state or
      federal law is  necessary  or desirable as a condition
      of or in connection  with the granting of such Option,
      the  assignment  of such  Option  or the  purchase  or
      delivery of shares thereunder,  the delivery of any or
      all shares  pursuant  to such  Option may be  withheld
      unless  and  until  such  listing,   registration   or
      qualification   shall   have  been   affected.   If  a
      registration  statement  is not in  effect  under  the
      Securities  Act of 1933,  as amended (the  "Securities
      Act"),  or any applicable  state  securities laws with
      respect  to  the  shares  of  stock   purchasable   or
      otherwise  deliverable under Options then outstanding,
      the   Committee   may  require,   as  a  condition  of
      assignment   or   exercise  of  the  Option  or  as  a
      condition to any other  delivery of Stock  pursuant to
      an Option,  that the Participant or other recipient of
      an  Option  represent,  in  writing,  that the  shares
      received  pursuant  to the Option  are being  acquired
      for  investment  and not  with a view to  distribution
      and agree  that the  shares  will not be  disposed  of
      except   pursuant   to   an   effective   registration
      statement,  unless the Company  shall have received an
      opinion of  counsel  that such  disposition  is exempt
      from such  requirement  under the  Securities  Act and
      any  applicable  state  securities  laws.  The Company
      may  include  on  certificates   representing   shares
      delivered   pursuant   to  an  Option   such   legends
      referring   to  the   foregoing   representations   or
      restrictions or any other  applicable  restrictions on
      resale as the Company,  in its discretion,  shall deem
      appropriate."



      Except  as  specifically  amended  hereby,  the Plan  shall
continue  to remain  in full  force  and  effect  as before  this
First  Amendment,  and this First  Amendment  shall be  effective
with  respect to any Options  granted  under the Plan,  including
those granted before the effective date of this First Amendment.

      IN WITNESS  WHEREOF,  the Board of Directors of the Company
has caused  this First  Amendment  to be executed in the form and
as of the date set forth above.

                               DATASTREAM SYSTEMS, INC.


                               By:  /s/ Larry G. Blackwell

                               Title:     Chairman,     President
                               and       Chief Executive Officer


<PAGE>





                        EXHIBIT 10.2(a)






           FIRST AMENDMENT TO THE AMENDED AND RESTATED
    DATASTREAM SYSTEMS, INC. STOCK OPTION PLAN FOR DIRECTORS



      THIS  FIRST   AMENDMENT   TO  THE  AMENDED   AND   RESTATED
DATASTREAM  SYSTEMS,  INC. STOCK OPTION PLAN FOR DIRECTORS  (this
"First  Amendment")  is  made  effective  as of the  13th  day of
March,   1998,   by   Datastream   Systems,   Inc.,   a  Delaware
corporation (the "Company").

W I T N E S S E T H:

      WHEREAS,  the Company has adopted the Amended and  Restated
Datastream  Systems,  Inc.  Stock Option Plan for  Directors  (as
Amended and Restated through April 12, 1996) (the "Plan"); and

      WHEREAS,  Section  11 of the Plan  authorizes  the Board of
Directors of the Company to amend the Plan; and

      WHEREAS,  the Board of Directors of the Company now desires
to amend the Plan to permit  certain  transfers of  non-qualified
stock options granted under the Plan.

      NOW,  THEREFORE,  the  Board of  Directors  of the  Company
hereby amends the Plan as follows:



      Section  10 of the  Plan  is  hereby  amended  by  deleting
Paragraph (c)   in  its  entirety  and   replacing  it  with  the
following new Paragraphs (c) and (d):

      "(c) Notwithstanding  (a) and (b) of this  Section 10,
      a  Director  may  assign  all  or  any  portion  of  a
      non-qualified  stock option  granted to him to (i) his
      spouse or lineal descendants,  (ii) one or more trusts
      for the  benefit of his spouse or lineal  descendants,
      (iii) a  partnership  of which  his  spouse  or lineal
      descendants  are  the  only  partners  or  (iv) a  tax
      exempt organization as described in  Section 501(c)(3)
      of the  Code,  as may be  permitted  under  Securities
      Exchange  Commission Rule 16b-3 as in effect from time
      to  time.   In  that   event,   the   spouse,   lineal
      descendant,   trust,   partnership   or   tax   exempt
      organization  will be entitled to all of the rights of
      the Director  with respect to the assigned  portion of
      such  nonqualified   option,  and  such  non-qualified
      option  will  continue  to be  subject  to  all of the
      terms and conditions  that governed the  non-qualified
      option  during  the  period  that  it was  held by the
      Director;  provided,  however,  that such assignee may
      not further assign the non-qualified  option except by
      will or by the laws of descent and  distribution.  Any
      such   assignment   will  be  permitted  only  if  the
      Director   does   not   receive   any    consideration
      therefore.  Additionally,  in order for an  assignment
      by a Director to be  effective,  (i) at  least 30 days
      prior to the date of  assignment,  the  Director  must
      notify  the  Company  in  writing  of the  date of the
      assignment,   the  non-qualified   option  or  portion
      thereof  to  be  assigned   and  the  name,   address,
      telephone  number  and  social  security  or  employer
      identification  number of the  assignee,  (ii) at  the
      time of  assignment,  the  Director  must  execute  an
      appropriate   written   agreement   that  the  Company
      provides to evidence  the  assignment  and to agree to
      remit  any  applicable  withholding  the  Company  may
      require  and  (iii) at  the  time of  assignment,  the
      assignee  pursuant  to a  written  agreement  that the
      Company  provides  must  agree to be bound by the same
      terms and conditions  that governed the  non-qualified
      option during the period it was held by the Director.

      (d)  A  Director,  his  transferee  upon his death and
      his  permitted  assignee  may not  transfer any of the
      Common Stock  acquired  pursuant to the exercise of an
      Option  until six months from the date of grant of the
      Option."



      Section 13 of the Plan is hereby  deleted  in its  entirety
and replaced with the following new Section 13:

      "13. Restrictions   on   Transfer   of   Non-Qualified
      Option  and  Delivery  and  Sale of  Shares;  Legends.
      Each  option is  subject to the  condition  that if at
      any  time  the  Committee,  in its  discretion,  shall
      determine   that   the   listing,    registration   or
      qualification  of the shares  covered  by such  option
      upon any  securities  exchange  or under  any state or
      federal laws  necessary or desirable as a condition of
      or in  connection  with the  granting of such  option,
      the  assignment  of such  option  or the  purchase  or
      delivery of shares thereunder,  the delivery of any or
      all shares  pursuant  to such  option may be  withheld
      unless  and  until  such  listing,   registration   or
      qualification   shall   have  been   effected.   If  a
      registration  statement  is not in  effect  under  the
      Securities  Act  of  1933  or  any  applicable   state
      securities  laws with  respect to the shares of Common
      Stock  purchasable  or  otherwise   deliverable  under
      options then  outstanding,  the Committee may require,
      as a  condition  of  assignment  or  exercise  of  any
      option  or as a  condition  to any other  delivery  of
      Common Stock pursuant to an option,  that the Director
      represent,   in  writing,  that  the  shares  received
      pursuant  to  the  option  are  being   acquired   for
      investment  and not  with a view to  distribution  and
      agree that the shares  will not be  disposed of except
      pursuant  to  an  effective  registration   statement,
      unless the Company  shall have  received an opinion of
      counsel  that such  disposition  is  exempt  from such
      requirement  under the  Securities Act of 1933 and any
      applicable  state  securities  laws.  The  Company may
      include on  certificates  representing  shares  issued
      pursuant to an option such  legends  referring  to the
      foregoing   representations  or  restrictions  or  any
      other   applicable   restrictions  on  resale  as  the
      Company, in its discretion, shall deem appropriate."



      The Plan is hereby  amended  by adding  the  following  new
Section 14:

      "14. Non-alienation   of   Benefits.   Other  than  as
      specifically  permitted  in  Section  10,  no  benefit
      under  the Plan  shall be  subject  in any  manner  to
      anticipation,  alienation, sale, transfer, assignment,
      pledge,  encumbrance or charge;  and any attempt to do
      so other  than as  specifically  permitted  thereunder
      shall  be  void.  No  such  benefit  shall,  prior  to
      receipt,  be in any  manner  liable  for or subject to
      the  debts,  contracts,  liabilities,  engagements  or
      torts of the recipient."



      Except  as  specifically  amended  hereby,  the Plan  shall
continue  to remain  in full  force  and  effect  as before  this
First  Amendment,  and the  First  Amendment  shall be  effective
with  respect to any options  granted  under the Plan,  including
those   granted   before  the   effective   date  of  this  First
Amendment,  notwithstanding  any  provisions  in  the  applicable
non-qualified stock option agreement to the contrary.

      IN WITNESS  WHEREOF,  the Board of Directors of the Company
has caused  this First  Amendment  to be executed in the form and
as of the date set forth above.

                               DATASTREAM SYSTEMS, INC.


                               By:  /s/ Larry G. Blackwell

                               Title:  Chairman, President and
                               Chief Executive Officer



<PAGE>






                                                EXHIBIT  11






                  Datastream Systems, Inc. and Subsidiaries
                 Computation of Historical Earnings Per Share


Income per share calculations:


Year ended December 31,
                                   1995          1996           1997
                                   ----          ----           ----


Net income                     4,346,059   (28,009,729)    11,437,897
                               =========    ===========    ==========

Weighted average number of common and common equivalent shares
are as follows:

Basic weighted average common
shares outstanding            13,004,474    16,977,134     18,396,920

Shares issued from assumed
exercise of options and
warrants (1)                   1,361,282       708,388        849,028

Diluted weighted average
common shares outstanding     14,365,756    17,685,522     19,245,948


Per share data:
Basic net income per share          0.33         (1.65)          0.62
Diluted net income per share  $     0.30         (1.58)          0.59

(1)  Shares   issued  from   assumed   exercise  of  options  and
warrants  include the number of  incremental  shares  which would
result from  applying the  treasury  stock method for options and
warrants.



<PAGE>








                                    EXHIBIT  21




                      LIST OF SUBSIDIARIES OF THE COMPANY


o  Datastream Systems International, Inc.
o  SQL Systems Group, B.V.
o  SQL Rapier France, SA
o  SQL Systems Deutschland, GmbH
o  SQL Rapier France, Sarl
o  SQL Products, BV
o  SQL Products, NV
o  Asystum Participations, BV
o  SQL System Participaties, BV
o  Datastream Systems (UK), Ltd.
o  Sirlog, SA (Groupe Datastream)
o  Datastream System, BV
o  SQL Systems, Inc.


<PAGE>

                                                EXHIBIT  23






                        INDEPENDENT AUDITORS' CONSENT

The Board of Directors
Datastream Systems, Inc.:

We consent to  incorporation  by  reference  in the  Registration
Statements  on  Form  S-8  of  Datastream  Systems,  Inc.  of our
reports  dated  January 23,  1998,  relating to the  consolidated
balance sheets of Datastream  Systems,  Inc. and  Subsidiaries as
of  December  31,  1996 and 1997,  and the  related  consolidated
statements of operations,  stockholders'  equity,  and cash flows
for each of the years in the  three-year  period  ended  December
31,  1997,  and related  schedule,  which  reports  appear in the
December  31,  1997  annual  report  on Form  10-K of  Datastream
Systems, Inc.




Greenville, South Carolina                  KPMG Peat Marwick LLP
March 30, 1998


<PAGE>