|   | R | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|---|-----------------------------------------------------------------------------------------|

|   | o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|---|------------------------------------------------------------------------------------------|

| Indiana(State or other jurisdictionof incorporation or organization)                                   |   | 45-1505676(I.R.S. EmployerIdentification No.) |
|--------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|
|                                                                                                   |   |                                          |
| 7601 Interactive WayIndianapolis, IN 46278(Address of principal executive offices, including zip code) |
|                                                                                                   |   |                                          |
| (317) 872-3000(Registrant’s telephone number, including area code)                               |
|                                                                                                   |   |                                          |
| Not Applicable                                                                                         |
| (Former name, former address and former fiscal year, if changed since last report)                     |

| Yes     R | No       ̈ |
|------------------------------------|----------------------------------------------|

| Yes     R | No       ̈ |
|------------------------------------|----------------------------------------------|

| Large accelerated filer |  ̈ |   | Accelerated filer | R |   | Non-accelerated filer(Do not check if a smaller reporting company) |  ̈ |   | Smaller reporting company |  ̈ |
|-------------------------|--------|--------|-------------------|---|--------|--------------------------------------------------------------------|--------|--------|---------------------------|--------|

----

----

| PART I. FINANCIAL INFORMATION | Page                                                                                                                    |
|-------------------------------|-------------------------------------------------------------------------------------------------------------------------|
|                          |                                                                                                                    |   |
| Item 1.                       | Financial Statements.                                                                                                   |   |
|                          |                                                                                                                    |   |
|                          | Condensed Consolidated Balance Sheets as of March 31, 2012 and December 31, 2011                                        | 1 |
|                          |                                                                                                                    |   |
|                          | Condensed Consolidated Statements of Income and Comprehensive Income for the Three Months Ended March 31, 2012 and 2011 | 2 |
|                          |                                                                                                                    |   |
|                          | Condensed Consolidated Statement of Shareholders’ Equity for the Three Months Ended March 31, 2012                | 3 |
|                          |                                                                                                                    |   |
|                          | Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2012 and 2011                      | 4 |
|                          |                                                                                                                    |   |
|                          | Notes to Condensed Consolidated Financial Statements                                                                    | 5 |
|                          |                                                                                                                    |   |
| Item 2.                       | Management’s Discussion and Analysis of Financial Condition and Results of Operations.                            | 13 |
|                          |                                                                                                                    |   |
| Item 3.                       | Quantitative and Qualitative Disclosures About Market Risk.                                                             | 22 |
|                          |                                                                                                                    |   |
| Item 4.                       | Controls and Procedures.                                                                                                | 22 |
|                          |                                                                                                                    |   |
| PART II. OTHER INFORMATION    |                                                                                                                    |
|                          |                                                                                                                    |   |
| Item 1.                       | Legal Proceedings.                                                                                                      | 23 |
|                          |                                                                                                                    |   |
| Item 1A.                      | Risk Factors.                                                                                                           | 23 |
|                          |                                                                                                                    |   |
| Item 6.                       | Exhibits.                                                                                                               | 23 |
|                          |                                                                                                                    |   |
| SIGNATURE                     | 24                                                                                                                      |

----

|                                                                                                                                                                      |   | March 31,   |      |   | December 31, |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------|-----------|--------|--------------|--------|
|                                                                                                                                                                      |   | 2012        |      |   | 2011         |   |
|                                                                                                                                                                      |   | (unaudited) |      |   |         |   |
| Assets                                                                                                                                                                    |   |        |      |   |         |   |
| Current assets:                                                                                                                                                           |   |        |      |   |         |   |
| Cash and cash equivalents                                                                                                                                                 |   | $           | 25,616    |   |         | $      | 28,465 |   |
| Short-term investments                                                                                                                                                    |   |        | 39,076    |   |         |   | 40,589 |   |
| Accounts receivable, net of allowance for doubtful accounts of $1,748 at March 31, 2012 and $1,718 at December 31, 2011                                                   |   |        | 51,679    |   |         |   | 56,331 |   |
| Deferred tax assets, net                                                                                                                                                  |   |        | 8,303     |   |         |   | 8,952 |   |
| Prepaid expenses                                                                                                                                                          |   |        | 11,910    |   |         |   | 11,474 |   |
| Other current assets                                                                                                                                                      |   |        | 5,120     |   |         |   | 4,966 |   |
| Total current assets                                                                                                                                                      |   |        | 141,704   |   |         |   | 150,777 |   |
| Long-term investments                                                                                                                                                     |   |        | 24,440    |   |         |   | 23,415 |   |
| Property and equipment, net                                                                                                                                               |   |        | 19,454    |   |         |   | 18,304 |   |
| Goodwill                                                                                                                                                                  |   |        | 28,494    |   |         |   | 22,696 |   |
| Intangible assets, net                                                                                                                                                    |   |        | 16,071    |   |         |   | 15,029 |   |
| Other assets, net                                                                                                                                                         |   |        | 2,423     |   |         |   | 2,581 |   |
| Total assets                                                                                                                                                              |   | $           | 232,586   |   |         | $      | 232,802 |   |
|                                                                                                                                                                      |   |        |      |   |         |   |   |   |
| Liabilities and Shareholders’ Equity                                                                                                                                |   |        |      |   |         |   |   |   |
| Current liabilities:                                                                                                                                                      |   |        |      |   |         |   |   |   |
| Accounts payable and accrued liabilities                                                                                                                                  |   | $           | 13,329    |   |         | $      | 16,545 |   |
| Accrued compensation and related expenses                                                                                                                                 |   |        | 6,209     |   |         |   | 8,870 |   |
| Deferred product revenues                                                                                                                                                 |   |        | 4,633     |   |         |   | 3,870 |   |
| Deferred services revenues                                                                                                                                                |   |        | 58,441    |   |         |   | 57,423 |   |
| Total current liabilities                                                                                                                                                 |   |        | 82,612    |   |         |   | 86,708 |   |
| Deferred revenue                                                                                                                                                          |   |        | 14,708    |   |         |   | 14,141 |   |
| Deferred tax liabilities, net                                                                                                                                             |   |        | 876       |   |         |   | 1,688 |   |
| Other long-term liabilities                                                                                                                                               |   |        | 300       |   |         |   | 291 |   |
| Total liabilities                                                                                                                                                         |   |        | 98,496    |   |         |   | 102,828 |   |
|                                                                                                                                                                      |   |        |      |   |         |   |   |   |
| Shareholders’ equity:                                                                                                                                               |   |        |      |   |         |   |   |   |
| Preferred stock, no par value: 10,000,000 shares authorized; no shares issued and outstanding                                                                             |   |        | --        |   |         |   | -- |   |
| Common stock, $0.01 par value; 100,000,000 shares authorized; 19,161,782 issued and outstanding at March 31, 2012, 18,961,497 issued and outstanding at December 31, 2011 |   |        |  192 |   |         |   | 190 |   |
| Additional paid-in capital                                                                                                                                                |   |        | 122,956   |   |         |   | 119,644 |   |
| Accumulated other comprehensive income (loss)                                                                                                                             |   |        | 420       |   |         |   | (193 | ) |
| Retained earnings                                                                                                                                                         |   |        | 10,522    |   |         |   | 10,333 |   |
| Total shareholders’ equity                                                                                                                                          |   |        | 134,090   |   |         |   | 129,974 |   |
| Total liabilities and shareholders’ equity                                                                                                                          |   | $           | 232,586   |   |         | $      | 232,802 |   |

----

|                                         |   | Three Months EndedMarch 31, |   |
|----------------------------------------------|--------|-----------------------------|--------|
|                                         |   | 2012                        |   |   | 2011 |   |
| Revenues:                                    |   |                        |   |   |   |   |
| Product                                      |   | $                           | 19,435 |   |   | $ | 20,424 |   |
| Recurring                                    |   |                        | 27,639 |   |   |   | 21,088 |   |
| Services                                     |   |                        | 5,694  |   |   |   | 6,218 |   |
| Total revenues                               |   |                        | 52,768 |   |   |   | 47,730 |   |
| Cost of revenues:                            |   |                        |   |   |   |   |   |   |
| Product                                      |   |                        | 5,652  |   |   |   | 6,196 |   |
| Recurring                                    |   |                        | 7,240  |   |   |   | 5,282 |   |
| Services                                     |   |                        | 4,574  |   |   |   | 3,712 |   |
| Amortization of intangible assets            |   |                        | 35     |   |   |   | 35 |   |
| Total cost of revenues                       |   |                        | 17,501 |   |   |   | 15,225 |   |
| Gross profit                                 |   |                        | 35,267 |   |   |   | 32,505 |   |
| Operating expenses:                          |   |                        |   |   |   |   |   |   |
| Sales and marketing                          |   |                        | 17,422 |   |   |   | 14,157 |   |
| Research and development                     |   |                        | 10,380 |   |   |   | 8,147 |   |
| General and administrative                   |   |                        | 6,888  |   |   |   | 5,095 |   |
| Amortization of intangible assets            |   |                        | 301    |   |   |   | 184 |   |
| Total operating expenses                     |   |                        | 34,991 |   |   |   | 27,583 |   |
| Operating income                             |   |                        | 276    |   |   |   | 4,922 |   |
| Other income (expense):                      |   |                        |   |   |   |   |   |   |
| Interest income, net                         |   |                        | 182    |   |   |   | 43 |   |
| Other expense, net                           |   |                        | (184   | ) |   |   | (166 | ) |
| Total other expense, net                     |   |                        | (2     | ) |   |   | (123 | ) |
| Income before income taxes                   |   |                        | 274    |   |   |   | 4,799 |   |
| Income tax expense                           |   |                        | 85     |   |   |   | 1,704 |   |
| Net income                                   |   |                        | 189    |   |   |   | 3,095 |   |
| Other comprehensive income:                  |   |                        |   |   |   |   |   |   |
| Foreign currency translation adjustment      |   |                        | 381    |   |   |   | -- |   |
| Net unrealized investment gain               |   |                        | 232    |   |   |   | 55 |   |
| Comprehensive income                         |   | $                           | 802    |   |   | $ | 3,150 |   |
|                                         |   |                        |   |   |   |   |   |   |
| Net income per share:                        |   |                        |   |   |   |   |   |   |
| Basic                                        |   | $                           | 0.01   |   |   | $ | 0.17 |   |
| Diluted                                      |   |                        | 0.01   |   |   |   | 0.16 |   |
|                                         |   |                        |   |   |   |   |   |   |
| Shares used to compute net income per share: |   |                        |   |   |   |   |   |   |
| Basic                                        |   |                        | 19,099 |   |   |   | 18,417 |   |
| Diluted                                      |   |                        | 20,020 |   |   |   | 19,780 |   |

----

|                                               |   | Common Stock |   |   | AdditionalPaid-in |   |     | Accumulated Other Comprehensive Income |   |   | Retained |   |   |     |      |
|----------------------------------------------------|--------|--------------|--------|--------|-------------------|--------|----------|----------------------------------------|--------|--------|----------|--------|--------|----------|-----------|
|                                               |   | Shares       |   |   | Amount            |   |     | Capital                                |   |   | (Loss)   |   |   | Earnings |      |   | Total |   |
| Balances, December 31, 2011                        |   |         | 18,961 |   |              | $      | 190      |                                   |   | $      | 119,644  |   |   | $        | (193      | ) |   | $ | 10,333 |   |   | $ | 129,974 |   |
|                                               |   |         |   |   |              |   |     |                                   |   |   |     |   |   |     |      |   |   |   |   |   |   |   |   |   |
| Stock-based compensation                           |   |         | --     |   |              |   | --       |                                   |   |   | 1,579    |   |   |     | --        |   |   |   | -- |   |   |   | 1,579 |   |
| Exercise of stock options                          |   |         | 174    |   |              |   | 2        |                                   |   |   | 1,269    |   |   |     | --        |   |   |   | -- |   |   |   | 1,271 |   |
| Issuances of common stock                          |   |         | 6      |   |              |   | --       |                                   |   |   | 141      |   |   |     | --        |   |   |   | -- |   |   |   | 141 |   |
| Issuances of restricted stock units                |   |         | 21     |   |              |   | --       |                                   |   |   | 253      |   |   |     | --        |   |   |   | -- |   |   |   | 253 |   |
| Tax benefits from stock-based payment arrangements |   |         | --     |   |              |   | --       |                                   |   |   | 70       |   |   |     | --        |   |   |   | -- |   |   |   | 70 |   |
| Net income                                         |   |         | --     |   |              |   | --       |                                   |   |   | --       |   |   |     | --        |   |   |   | 189 |   |   |   | 189 |   |
| Foreign currency translation adjustment            |   |         | --     |   |              |   |  -- |                                   |   |   |  -- |   |   |     | 381  |   |   |   | -- |   |   |   | 381 |   |
| Net unrealized investment gain                     |   |         | --     |   |              |   |  -- |                                   |   |   |  -- |   |   |     | 232  |   |   |   | -- |   |   |   |  232 |   |
| Balances, March 31, 2012                           |   |         | 19,162 |   |              | $      | 192      |                                   |   | $      | 122,956  |   |   | $        | 420       |   |   | $ | 10,522 |   |   | $ | 134,090 |   |

----

|                                                                              |   | Three Months EndedMarch 31, |      |
|-----------------------------------------------------------------------------------|--------|-----------------------------|-----------|
|                                                                              |   | 2012                        |      |   | 2011 |   |
| Operating activities:                                                             |   |                        |      |   |   |   |
| Net income                                                                        |   | $                           | 189       |   |   | $ | 3,095 |   |
| Adjustments to reconcile net income to net cash provided by operating activities: |   |                        |      |   |   |   |   |   |
| Depreciation, amortization and other non-cash items                               |   |                        | 2,051     |   |   |   | 1,481 |   |
| Stock-based compensation expense                                                  |   |                        | 1,579     |   |   |   | 1,318 |   |
| Tax benefits from stock-based payment arrangements                                |   |                        | (70       | ) |   |   | (862 | ) |
| Deferred income tax                                                               |   |                        | (163      | ) |   |   | 34 |   |
| Accretion of investment income                                                    |   |                        | 112       |   |   |   | (682 | ) |
| Gain on disposal of fixed assets                                                  |   |                        | 25        |   |   |   | -- |   |
| Changes in operating assets and liabilities:                                      |   |                        |      |   |   |   |   |   |
| Accounts receivable                                                               |   |                        | 5,771     |   |   |   | (49 | ) |
| Prepaid expenses                                                                  |   |                        | (394      | ) |   |   | (1,311 | ) |
| Other current assets                                                              |   |                        | (154      | ) |   |   | 272 |   |
| Other assets                                                                      |   |                        | 158       |   |   |   | (128 | ) |
| Accounts payable and accrued liabilities                                          |   |                        | (2,973    | ) |   |   | (1,598 | ) |
| Accrued compensation and related expenses                                         |   |                        | (2,835    | ) |   |   | (1,585 | ) |
| Deferred product revenues                                                         |   |                        | 518       |   |   |   | 1,793 |   |
| Deferred services revenues                                                        |   |                        | 605       |   |   |   | 4,889 |   |
| Net cash provided by operating activities                                         |   |                        | 4,419     |   |   |   | 6,667 |   |
|                                                                              |   |                        |      |   |   |   |   |   |
| Investing activities:                                                             |   |                        |      |   |   |   |   |   |
| Sales of available-for-sale investments                                           |   |                        | 21,908    |   |   |   | 21,028 |   |
| Purchases of available-for-sale investments                                       |   |                        | (21,300   | ) |   |   | (22,740 | ) |
| Purchases of property and equipment                                               |   |                        | (2,569    | ) |   |   | (2,139 | ) |
| Acquisitions, net of cash                                                         |   |                        | (7,042    | ) |   |   | (4,111 | ) |
| Unrealized gain on investment                                                     |   |                        | -         |   |   |   | 26 |   |
| Net cash used in investing activities                                             |   |                        | (9,003    | ) |   |   | (7,936 | ) |
|                                                                              |   |                        |      |   |   |   |   |   |
| Financing activities:                                                             |   |                        |      |   |   |   |   |   |
| Proceeds from stock options exercised                                             |   |                        | 1,271     |   |   |   | 3,881 |   |
| Proceeds from issuance of common stock                                            |   |                        | 141       |   |   |   | 96 |   |
|     Employee taxes withheld for restricted stock units        |   |                        |  253 |   |   |   | -- |   |
|     Tax benefit from stock-based payment arrangements              |   |                        |  70  |   |   |   |  862 |   |
| Net cash provided by financing activities                                         |   |                        | 1,735     |   |   |   | 4,839 |   |
|                                                                              |   |                        |      |   |   |   |   |   |
| Net (decrease) increase in cash and cash equivalents                              |   |                        | (2,849    | ) |   |   | 3,570 |   |
| Cash and cash equivalents, beginning of period                                    |   |                        | 28,465    |   |   |   | 48,300 |   |
| Cash and cash equivalents, end of period                                          |   | $                           | 25,616    |   |   | $ | 51,870 |   |
|                                                                              |   |                        |      |   |   |   |   |   |
| Cash paid during the year for:                                                    |   |                        |      |   |   |   |   |   |
| Income taxes                                                                      |   | $                           | 2,094     |   |   | $ | 842 |   |
|                                                                              |   |                        |      |   |   |   |   |   |
| Other non-cash item:                                                              |   |                        |      |   |   |   |   |   |
| Purchase of property and equipment payable at end of period                       |   | $                           | 234       |   |   | $ | 746 |   |

----

| 1. | FINANCIAL STATEMENT PRESENTATION |
|----|----------------------------------|

| 2. | SUMMARY OF CERTAIN ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS  |
|----|-----------------------------------------------------------------------------------|

| 3. | INVESTMENTS |
|----|-------------|

----

| ·   | Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.   |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                      |   | Fair Value Measurements at March 31, 2012 Using |      |
|---------------------------------------------------------------------------|--------|----------------------------------------------------------------|-----------|
| Description                                                               |   | Total                                                          |      |   | Quoted Prices inActive Markets forIdentical Assets(Level 1) |   |   | SignificantOther ObservableInputs(Level 2) |   |   | SignificantUnobservableInputs(Level 3) |   |
| Cash & cash equivalents:                                              |   |                                                           |      |   |   |   |   |   |   |   |   |   |
| Money market funds                                                        |   | $                                                              | 1,017     |   |   | $ | 1,017 |   |   | $ | -- |   |   | $ | -- |   |
|         Cash                           |   |                                                           |  105 |   |   |   |  105 |   |   |   |  -- |   |   |   | -- |   |
| Total                                                                     |   | $                                                              | 1,122     |   |   | $ | 1,122 |   |   | $ | -- |   |   | $ | -- |   |
|                                                                      |   |                                                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Short-term investments:                                                   |   |                                                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporate notes                                                           |   | $                                                              | 27,513    |   |   | $ | -- |   |   | $ | 27,513 |   |   | $ | -- |   |
| Agency bonds                                                              |   |                                                           | 2,755     |   |   |   | -- |   |   |   | 2,755 |   |   |   | -- |   |
| Commercial paper                                                          |   |                                                           | 6,687     |   |   |   | -- |   |   |   | 6,687 |   |   |   | -- |   |
|         Certificate of deposit         |   |                                                           | 1,099     |   |   |   | -- |   |   |   | 1,099 |   |   |   | -- |   |
|         International government bonds |   |                                                           | 1,022     |   |   |   |  -- |   |   |   | 1,022 |   |   |   | -- |   |
| Total                                                                     |   | $                                                              | 39,076    |   |   | $ | -- |   |   | $ | 39,076 |   |   | $ | -- |   |
|                                                                      |   |                                                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Long-term investments:                                                    |   |                                                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporate notes                                                           |   | $                                                              | 21,420    |   |   | $ | -- |   |   | $ | 21,420 |   |   | $ | -- |   |
| Agency bonds                                                              |   |                                                           | 3,020     |   |   |   | -- |   |   |   | 3,020 |   |   |   | -- |   |
| Total                                                                     |   | $                                                              | 24,440    |   |   | $ | -- |   |   | $ | 24,440 |   |   | $ | -- |   |

|                         |   | Fair Value Measurements at December 31, 2011 Using |   |
|------------------------------|--------|----------------------------------------------------|--------|
| Description                  |   | Total                                              |   |   | Quoted Prices inActive Markets forIdentical Assets(Level 1) |   |   | SignificantOther ObservableInputs(Level 2) |   |   | SignificantUnobservableInputs(Level 3) |   |
| Cash & cash equivalents: |   |                                               |   |   |   |   |   |   |   |   |   |   |
| Money market funds           |   | $                                                  | 3,027  |   |   | $ | 3,027 |   |   | $ | -- |   |   | $ | -- |   |
| Cash                         |   |                                               | 384    |   |   |   | 384 |   |   |   |  -- |   |   |   |  -- |   |
| Total                        |   | $                                                  | 3,411  |   |   | $ | 3,411 |   |   | $ | -- |   |   | $ | -- |   |
|                         |   |                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Short-term investments:      |   |                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporate notes              |   | $                                                  | 29,084 |   |   | $ | -- |   |   | $ | 29,084 |   |   | $ | -- |   |
| Agency bonds                 |   |                                               | 5,409  |   |   |   | -- |   |   |   | 5,409 |   |   |   |  -- |   |
| Commercial paper             |   |                                               | 4,997  |   |   |   |  -- |   |   |   | 4,997 |   |   |   |  -- |   |
| Certificate of deposit       |   |                                               | 1,099  |   |   |   |  -- |   |   |   | 1,099 |   |   |   |  -- |   |
| Total                        |   | $                                                  | 40,589 |   |   | $ | -- |   |   | $ | 40,589 |   |   | $ | -- |   |
|                         |   |                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Long-term investments:       |   |                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporate notes              |   | $                                                  | 21,395 |   |   | $ | -- |   |   | $ | 21,395 |   |   | $ | -- |   |
| Agency bonds                 |   |                                               | 2,020  |   |   |   |  -- |   |   |   | 2,020 |   |   |   |  -- |   |
| Total                        |   | $                                                  | 23,415 |   |   | $ | -- |   |   | $ | 23,415 |   |   | $ | -- |   |

----

|  4. |  NET INCOME PER SHARE |
|----------|----------------------------|

|                                                    |   | Three Months EndedMarch 31, |   |
|---------------------------------------------------------|--------|-----------------------------|--------|
|                                                    |   | 2012                        |   |   | 2011 |   |
| Net income, as reported (A)                             |   | $                           | 189    |   |   | $ | 3,095 |   |
|                                                    |   |                        |   |   |   |   |   |   |
| Weighted average shares of common stock outstanding (B) |   |                        | 19,099 |   |   |   | 18,417 |   |
| Dilutive effect of employee stock options               |   |                        | 921    |   |   |   | 1,363 |   |
| Common stock and common stock equivalents (C)           |   |                        | 20,020 |   |   |   | 19,780 |   |
|                                                    |   |                        |   |   |   |   |   |   |
| Net income per share:                                   |   |                        |   |   |   |   |   |   |
| Basic (A/B)                                             |   | $                           | 0.01   |   |   | $ | 0.17 |   |
| Diluted (A/C)                                           |   |                        | 0.01   |   |   |   | 0.16 |   |

| 5. | STOCK-BASED COMPENSATION |
|----|--------------------------|

----

|                                          |   | Three Months EndedMarch 31, |   |
|-----------------------------------------------|--------|-----------------------------|--------|
|                                          |   | 2012                        |   |   | 2011 |   |
| Stock-based compensation expense by category: |   |                        |   |   |   |   |
| Cost of recurring revenues                    |   | $                           | 122    |   |   | $ | 105 |   |
| Cost of services revenues                     |   |                        | 34     |   |   |   | 25 |   |
| Sales and marketing                           |   |                        | 533    |   |   |   | 392 |   |
| Research and development                      |   |                        | 397    |   |   |   | 408 |   |
| General and administrative                    |   |                        | 493    |   |   |   | 388 |   |
| Total stock-based compensation expense        |   | $                           | 1,579  |   |   | $ | 1,318 |   |

|                                                     |   | Three Months EndedMarch 31, |   |
|----------------------------------------------------------|--------|-----------------------------|--------|
| Valuation assumptions for non-performance-based options: |   | 2012                        |   |   | 2011 |   |
| Dividend yield                                           |   |                        | --     | % |   |   | -- | % |
| Expected volatility                                      |   |                        | 63.63  | % |   |   | 63.10 | % |
| Risk-free interest rate                                  |   |                        | 0.81   | % |   |   | 1.74 | % |
| Expected life of option (in years)                       |   |                        | 4.25   |   |   |   | 4.25 |   |

|                                                 |   | Three Months EndedMarch 31, |   |
|------------------------------------------------------|--------|-----------------------------|--------|
| Valuation assumptions for performance-based options: |   | 2012                        |   |   | 2011 |   |
| Dividend yield                                       |   |                        | --     | % |   |   | -- | % |
| Expected volatility                                  |   |                        | 62.67  | % |   |   | 65.55 | % |
| Risk-free interest rate                              |   |                        | 0.94   | % |   |   | 1.97 | % |
| Expected life of option (in years)                   |   |                        | 4.75   |   |   |   | 4.75 |   |

|                                           |   | Options |         |   | Weighted-AverageExercisePrice |    |
|------------------------------------------------|--------|---------|--------------|--------|-------------------------------|---------|
|                                           |   |    |         |   |                          |    |
| Balances, beginning of year                    |   |    | 2,665,654    |   |                          | $       | 15.16 |   |
| Options granted                                |   |    | 353,000      |   |                          |    | 24.62 |   |
| Options exercised                              |   |    | (173,970     | )      |                          |    | 7.71 |   |
| Options cancelled, forfeited or expired        |   |    | (500         | )      |                          |    | 19.66 |   |
| Options outstanding                            |   |    | 2,844,184    |   |                          |    | 16.79 |   |
| Option price range                             |   |    | $2.59-$37.76 |   |                          |    |   |   |
| Weighted-average fair value of options granted |   | $       | 12.24        |   |                          |    |   |   |
| Options exercisable                            |   |    | 1,749,703    |   |                          |  $ | 12.87 |   |

----

|                       |                      |   |   |      |    | Options Outstanding                      |   |       | Options Exercisable           |   |
|----------------------------|---------------------------|--------|--------|-----------|---------|------------------------------------------|--------|------------|-------------------------------|--------|
| Range of Exercise Prices   |                      |   | Number |      |    | Weighted-AverageRemainingContractualLife |   |       | Weighted-AverageExercisePrice |   |   |   Number |   |   | Weighted-AverageExercisePrice |   |
| $                          | 2.59 – $5.61        |   |   |      | 315,626 |                                     |   |       | 1.87                          |   |   | $ | 4.47 |   |   |   | 315,626 |   |   | $ | 4.47 |   |
| $                          | 5.72– $6.03         |   |   |      | 190,738 |                                     |   |       | 2.20                          |   |   |   | 5.83 |   |   |   | 190,738 |   |   |   | 5.83 |   |
| $                          | 6.66 – $6.66        |   |   |      | 327,234 |                                     |   |       | 2.90                          |   |   |   | 6.66 |   |   |   | 216,609 |   |   |   | 6.66 |   |
| $                          | 6.70 – $14.79       |   |   |      | 325,420 |                                     |   |       | 1.77                          |   |   |   | 12.79 |   |   |   | 301,312 |   |   |   | 12.96 |   |
| $                          | 14.86 – $19.13      |   |   |      | 314,200 |                                     |   |       | 2.51                          |   |   |   | 17.48 |   |   |   | 267,327 |   |   |   | 17.52 |   |
| $                          | 19.19 – 19.34       |   |   |      | 22,000  |                                     |   |       | 3.26                          |   |   |   | 19.33 |   |   |   | 12,000 |   |   |   | 19.32 |   |
| $                          | 19.66 – $19.66 |   |   |      | 445,154 |                                     |   |       | 3.91                          |   |   |   | 19.66 |   |   |   | 195,779 |   |   |   | 19.66 |   |
| $                          | 19.77 – $22.92      |   |   |      | 201,312 |                                     |   |       | 1.25                          |   |   |   | 20.65 |   |   |   | 185,062 |   |   |   | 20.53 |   |
| $                          | 24.50 - $24.50            |   |   |      | 325,000 |                                     |   |       | 6.10                          |   |   |   | 24.50 |   |   |   | -- |   |   |   | -- |   |
| $                          | 26.88 - $37.76            |   |   |      | 377,500 |                                     |   |       | 5.06                          |   |   |   | 32.03 |   |   |   | 65,250 |   |   |   | 32.12 |   |
| Total shares/average price |                      |   |   | 2,844,184 |    |                                     |   | 3.26  |                          |   |   | 16.79  |   |   |   | 1,749,703 |   |   |   | 12.88  |   |

|                        |   | Awards |    |   | Weighted-Average Grant-Date Price |   |
|-----------------------------|--------|--------|---------|--------|-----------------------------------|--------|
|                        |   |   |    |   |                              |   |
| Balances, beginning of year |   |   | 116,340 |   |                              | $      | 32.33  |   |
| RSUs granted                |   |   | 136,500 |   |                              |   | 32.33  |   |
| RSUs vested                 |   |   | (28,869 | )      |                              |   | 30.63  |   |
| RSUs forfeited              |   |   | (2,332  | )      |                              |   | 28.30  |   |
| RSUs outstanding            |   |   | 221,639 |   |                              |   | 29.96  |   |

| 6. | CONCENTRATION OF CREDIT RISK |
|----|------------------------------|

| 7. | COMMITMENTS AND CONTINGENCIES |
|----|-------------------------------|

----

| 8. | INCOME TAXES |
|----|--------------|

|                                                                            |   | Three Months EndedMarch 31, |   |
|---------------------------------------------------------------------------------|--------|-----------------------------|--------|
|                                                                            |   | 2012                        |   |   | 2011 |   |
| Expected income tax expense at 35% tax rate                                     |   | $                           | 88     |   |   | $ | 1,680 |   |
| State taxes, net of federal benefit                                             |   |                        | 74     |   |   |   | 191 |   |
| Stock-based compensation expense related to non-deductible stock option expense |   |                        | 10     |   |   |   | 35 |   |
| Disqualifying dispositions of stock options                                     |   |                        | (10    | ) |   |   | (223 | ) |
| Research tax credit                                                             |   |                        | (67    | ) |   |   | (138 | ) |
| Other                                                                           |   |                        | (10    | ) |   |   | 159 |   |
| Income tax expense                                                              |   | $                           | 85     |   |   | $ | 1,704 |   |

----

| 9. | ACQUISITIONS  |
|----|--------------------|

|                                      |   | January 5, 2012 |               |
|-------------------------------------------|--------|-----------------|--------------------|
| Accounts receivable                       |   | $               | 1,119              |   |
| Property and equipment, net               |   |            | 539                |   |
| Prepaid expenses                          |   |            | 42                 |   |
| Intangible assets, net                    |   |            | 1,472              |   |
| Goodwill                                  |   |            | 5,269              |   |
| Total assets acquired                     |   |            | 8,441              |   |
| Accrued compensation and related expenses |   |            | (174               | ) |
| Deferred services revenues                |   |            | (1,225             | ) |
|  Net assets acquired                 |   | $          |    7,042 |

|                   |   | As of March 31, 2012 |   |   |                     |   |
|------------------------|--------|----------------------|--------|--------|--------------------------|--------|
|                   |   | Gross Amount         |   |   | Accumulated Amortization |   |   | Net Amount |   |   | Economic Useful Life(in years) |   |
| Customer relationships |   | $                    | 1,400  |   |                     | $      | 20 |   |   | $ | 1,380 |   |   |   | 18 |   |

----

|                                      |   | July 1, 2011 |   |
|-------------------------------------------|--------|--------------|--------|
| Cash and cash equivalents                 |   | $            | 2,106  |   |
| Accounts receivable                       |   |         | 5,790  |   |
| Property and equipment, net               |   |         | 419    |   |
| Prepaid expenses                          |   |         | 842    |   |
| Intangible assets, net                    |   |         | 2,410  |   |
| Goodwill                                  |   |         | 9,197  |   |
| Total assets acquired                     |   |         | 20,764 |   |
| Accounts payable and accrued liabilities  |   |         | (3,537 | ) |
| Accrued compensation and related expenses |   |         | (3,133 | ) |
| Other liability, net                      |   |         | (329   | ) |
| Deferred tax liability                    |   |         | (723   | ) |
| Deferred services revenues                |   |         | (1,671 | ) |
| Net assets acquired                       |   | $            | 11,371 |   |

|                   |   | As of March 31, 2012 |   |   |                     |   |
|------------------------|--------|----------------------|--------|--------|--------------------------|--------|
|                   |   | Gross Amount         |   |   | Accumulated Amortization |   |   | Net Amount |   |   | Economic Useful Life(in years) |   |
| Customer relationships |   | $                    | 2,410  |   |                     | $      | 151 |   |   | $ | 2,259 |   |   |   | 12 |   |

|                                      |   | February 28, 2011 |   |
|-------------------------------------------|--------|-------------------|--------|
| Cash and cash equivalents                 |   | $                 | 815    |   |
| Accounts receivable                       |   |              | 1,098  |   |
| Prepaid expenses                          |   |              | 288    |   |
| Property and equipment, net               |   |              | 123    |   |
| Other assets, net                         |   |              | 221    |   |
| Intangible assets, net                    |   |              | 2,670  |   |
| Goodwill                                  |   |              | 2,344  |   |
| Total assets acquired                     |   |              | 7,559  |   |
| Accounts payable and accrued liabilities  |   |              | (812   | ) |
| Accrued compensation and related expenses |   |              | (102   | ) |
| Contingent liability                      |   |              | (370   | ) |
| Deferred tax liability                    |   |              | (801   | ) |
| Deferred services revenues                |   |              | (548   | ) |
| Net assets acquired                       |   | $                 | 4,926  |   |

|                   |   | As of March 31, 2012 |   |   |                     |   |
|------------------------|--------|----------------------|--------|--------|--------------------------|--------|
|                   |   | Gross Amount         |   |   | Accumulated Amortization |   |   | Net Amount |   |   | Economic Useful Life(in years) |   |
| Customer relationships |   | $                    | 2,670  |   |                     | $      | 280 |   |   | $ | 2,390 |   |   |   | 10 |   |

| 10. | SUBSEQUENT EVENT  |
|-----|------------------------|

| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
|---------|----------------------------------------------------------------------------------------------|

| ·   | Forward-Looking Information |
|--------------------|-----------------------------|

| ·   | Overview |
|--------------------|----------|

| ·   | Financial Highlights |
|--------------------|----------------------|

| ·   | Historical Results of Operations |
|--------------------|----------------------------------|

| ·   | Comparison of Three Months Ended March 31, 2012 and 2011 |
|--------------------|----------------------------------------------------------|

| ·   | Liquidity and Capital Resources |
|--------------------|---------------------------------|

| ·   | Critical Accounting Policies and Estimates |
|--------------------|--------------------------------------------|

----

|   | 1. | Continuing to gain market share with our contact center and unified communications solutions, particularly through our cloud-based deployment; |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4. | Leveraging our strategic and distribution partners to further penetrate existing accounts and markets. |
|--------|----|--------------------------------------------------------------------------------------------------------|

----

|                                       |   | Three Months EndedMarch 31, |   |
|--------------------------------------------|--------|-----------------------------|--------|
|                                       |   | 2012                        |   |   | 2011 |   |
|                                       |   |                        |   |   |   |   |
| Net income, as reported                    |   | $                           | 189    |   |   | $ | 3,095 |   |
| Purchase accounting adjustments:           |   |                        |   |   |   |   |   |   |
| Increase to revenues:                      |   |                        |   |   |   |   |   |   |
| Recurring                                  |   |                        | 130    |   |   |   | 59 |   |
| Services                                   |   |                        | --     |   |   |   | 31 |   |
| Reduction of operating expenses:           |   |                        |   |   |   |   |   |   |
| Customer relationships                     |   |                        | 256    |   |   |   | 139 |   |
| Technology                                 |   |                        | 35     |   |   |   | 35 |   |
| Non-compete agreements                     |   |                        | 45     |   |   |   | 45 |   |
| Acquisition costs                          |   |                        | 122    |   |   |   | 201 |   |
| Total                                      |   |                        | 588    |   |   |   | 510 |   |
| Non-cash stock-based compensation expense: |   |                        |   |   |   |   |   |   |
| Cost of recurring revenues                 |   |                        | 122    |   |   |   | 105 |   |
| Cost of services                           |   |                        | 34     |   |   |   | 25 |   |
| Sales and marketing                        |   |                        | 533    |   |   |   | 392 |   |
| Research and development                   |   |                        | 397    |   |   |   | 408 |   |
| General and administrative                 |   |                        | 493    |   |   |   | 388 |   |
| Total                                      |   |                        | 1,579  |   |   |   | 1,318 |   |
| Non-cash income tax expense                |   |                        | (501   | ) |   |   | 549 |   |
| Non-GAAP net income                        |   | $                           | 1,855  |   |   | $ | 5,472 |   |
|                                       |   |                        |   |   |   |   |   |   |
| Operating income, as reported              |   | $                           | 276    |   |   | $ | 4,922 |   |
| Purchase accounting adjustments            |   |                        | 588    |   |   |   | 510 |   |
| Non-cash stock-based compensation expense  |   |                        | 1,579  |   |   |   | 1,318 |   |
| Non-GAAP operating income                  |   | $                           | 2,443  |   |   | $ | 6,750 |   |
|                                       |   |                        |   |   |   |   |   |   |
| Diluted EPS, as reported                   |   | $                           | 0.01   |   |   | $ | 0.16 |   |
| Purchase accounting adjustments            |   |                        | 0.03   |   |   |   | 0.03 |   |
| Non-cash stock-based compensation expense  |   |                        | 0.08   |   |   |   | 0.07 |   |
| Non-cash income tax expense                |   |                        | (0.03  | ) |   |   | 0.02 |   |
| Non-GAAP diluted EPS                       |   | $                           | 0.09   |   |   | $ | 0.28 |   |

| Period                  |   | Revenues |   |   | Year-over-YearGrowth % |   |
|-------------------------|--------|----------|--------|--------|------------------------|--------|
| Three Months Ended:     |   |     |   |   |                   |   |
| March 31, 2012          |   | $        | 52.8   |   |                   |   | 11 | % |
| December 31, 2011       |   |     | 57.7   |   |                   |   | 14 |   |
| September 30, 2011      |   |     | 52.1   |   |                   |   | 25 |   |
| June 30, 2011           |   |     | 52.0   |   |                   |   | 34 |   |
| March 31, 2011          |   |     | 47.7   |   |                   |   | 36 |   |
|                    |   |     |   |   |                   |   |   |   |
|                    |   |     |   |   |                   |   |   |   |
|                    |   |     |   |   |                   |   |   |   |
| Year Ended December 31: |   |     |   |   |                   |   |   |   |
| 2011                    |   | $        | 209.5  |   |                   |   | 26 | % |
| 2010                    |   |     | 166.3  |   |                   |   | 27 |   |
| 2009                    |   |     | 131.4  |   |                   |   | 8 |   |

----

| Company  | Description of Company                                           | Purchase Price | Funding of Purchase Price |   | Working Capital Amount Acquired |   |   | Escrow Amount |   |   | # of Employees |   |
|----------|------------------------------------------------------------------|----------------|---------------------------|--------|---------------------------------|--------|--------|---------------|--------|--------|----------------|--------|
| Latitude | Provider of accounts receivable management software and services | $15.6 million  | Cash on hand              |   | $1.6 million                    |   |   | $1.1 million  |   |   |           | 40     |   |
|     |                                                             |           |                      |   |                            |   |   |          |   |   |           |   |   |
| Agori    | Reseller                                                         | $4.9 million   | Cash on hand              |   | $808,000                        |   |   | $493,000      |   |   |           | 16     |   |
|     |                                                             |           |                      |   |                            |   |   |          |   |   |           |   |
| CallTime | Reseller                                                         | $11.4 million  | Cash on hand              |   | $1.4 million                    |   |   | $2.1 million  |   |   |           | 21     |   |
|     |                                                             |           |                      |   |                            |   |   |          |   |   |           |   |   |
| ATIO     | Reseller                                                         | $7.0 million   | Cash on hand              |   | $1.8 million                    |   |   | $704,000      |   |   |           | 40     |   |

|                       |   | Three Months EndedMarch 31, |   |
|----------------------------|--------|-----------------------------|--------|
|                       |   | 2012                        |   |   | 2011 |   |
| Revenues:                  |   |                        |   |   |   |   |
| Product                    |   |                        | 37     | % |   |   | 43 | % |
| Recurring                  |   |                        | 52     |   |   |   | 44 |   |
| Services                   |   |                        | 11     |   |   |   | 13 |   |
| Total revenues             |   |                        | 100    |   |   |   | 100 |   |
| Cost of revenues:          |   |                        |   |   |   |   |   |   |
| Product                    |   |                        | 11     |   |   |   | 13 |   |
| Recurring                  |   |                        | 13     |   |   |   | 11 |   |
| Services                   |   |                        | 9      |   |   |   | 8 |   |
| Total cost of revenues     |   |                        | 33     |   |   |   | 32 |   |
| Gross profit               |   |                        | 67     |   |   |   | 68 |   |
| Operating expenses:        |   |                        |   |   |   |   |   |   |
| Sales and marketing        |   |                        | 33     |   |   |   | 30 |   |
| Research and development   |   |                        | 20     |   |   |   | 17 |   |
| General and administrative |   |                        | 13     |   |   |   | 11 |   |
| Total operating expenses   |   |                        | 66     |   |   |   | 58 |   |
| Operating income           |   |                        | 1      |   |   |   | 10 |   |
| Other income:              |   |                        |   |   |   |   |   |   |
| Interest income, net       |   |                        | --     |   |   |   | -- |   |
| Other expense              |   |                        | --     |   |   |   | -- |   |
| Total other income         |   |                        | --     |   |   |   | -- |   |
| Income before income taxes |   |                        | 1      |   |   |   | 10 |   |
| Income tax expense         |   |                        | --     |   |   |   | 4 |   |
| Net income                 |   |                        | 1      |   |   |   | 6 |   |

| Other comprehensive income:              |   |   |   |   |   |   |   |   |
|------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
| Foreign currency translation adjustments |   |   | 1      |   |   |   | --     |   |
| Net unrealized investment gain           |   |   | --     |   |   |   | --     |   |
| Comprehensive Income                     |   |   | 2      | %      |   |   | 6      | %      |

----

| Product Revenues              |   | Three Months Ended March 31, |   |
|-------------------------------|--------|------------------------------|--------|
|                          |   | 2012                         |   |   | 2011 |   |
|                          |   | ($ in thousands)             |   |
| Product revenues              |   | $                            | 19,435 |   |   | $ | 20,424 |   |
| Change from prior year period |   |                         | (5     | )% |   |   | 29 | % |
| Percentage of total revenues  |   |                         | 37     | % |   |   | 43 | % |

| Recurring Revenues            |   | Three Months Ended March 31, |   |
|-------------------------------|--------|------------------------------|--------|
|                          |   | 2012                         |   |   | 2011 |   |
|                          |   | ($ in thousands)             |   |
| Recurring revenues            |   | $                            | 27,639 |   |   | $ | 21,088 |   |
| Change from prior year period |   |                         | 31     | % |   |   | 32 | % |
| Percentage of total revenues  |   |                         | 52     | % |   |   | 44 | % |

|                     |   | Three Months Ended March 31, |   |
|--------------------------|--------|------------------------------|--------|
|                     |   | 2012                         |   |   | 2011 |   |
|                     |   | ($ in thousands)             |   |
| Renewal and support fees |   | $                            | 22,642 |   |   | $ | 18,213 |   |
| Cloud-based              |   |                         | 4,997  |   |   |   | 2,875 |   |
| Total                    |   | $                            | 27,639 |   |   | $ | 21,088 |   |

----

| Services Revenues             |   | Three Months Ended March 31, |   |
|-------------------------------|--------|------------------------------|--------|
|                          |   | 2012                         |   |   | 2011 |   |
|                          |   | ($ in thousands)             |   |
| Services revenues             |   | $                            | 5,694  |   |   | $ | 6,218 |   |
| Change from prior year period |   |                         | (8     | )% |   |   | 88 | % |
| Percentage of total revenues  |   |                         | 11     | % |   |   | 13 | % |

| Cost of Revenues                                  |   | Three Months Ended March 31, |   |
|---------------------------------------------------|--------|------------------------------|--------|
|                                              |   | 2012                         |   |   | 2011 |   |
|                                              |   | ($ in thousands)             |   |
| Cost of revenues:                                 |   |                         |   |   |   |   |
| Product                                           |   | $                            | 5,652  |   |   | $ | 6,196 |   |
| Recurring                                         |   |                         | 7,240  |   |   |   | 5,282 |   |
| Services                                          |   |                         | 4,574  |   |   |   | 3,712 |   |
| Total cost of revenues                            |   | $                            | 17,466 |   |   | $ | 15,190 |   |
| Change from prior year period                     |   |                         | 15     | % |   |   | 46 | % |
| Product cost as a % of product gross revenues     |   |                         | 29     | % |   |   | 30 | % |
| Recurring cost as a % of recurring gross revenues |   |                         | 26     | % |   |   | 25 | % |
| Services cost as a % of services gross revenues   |   |                         | 80     | % |   |   | 60 | % |

----

| Gross Profit                  |   | Three Months Ended March 31, |   |
|-------------------------------|--------|------------------------------|--------|
|                          |   | 2012                         |   |   | 2011 |   |
|                          |   | ($ in thousands)             |   |
| Gross profit                  |   | $                            | 35,267 |   |   | $ | 32,505 |   |
| Change from prior year period |   |                         | 8      | % |   |   | 32 | % |
| Percentage of total revenues  |   |                         | 67     | % |   |   | 68 | % |

| Sales and Marketing           |   | Three Months Ended March 31, |   |
|-------------------------------|--------|------------------------------|--------|
|                          |   | 2012                         |   |   | 2011 |   |
|                          |   | ($ in thousands)             |   |
| Sales and marketing expenses  |   | $                            | 17,422 |   |   | $ | 14,157 |   |
| Change from prior year period |   |                         | 23     | % |   |   | 37 | % |
| Percentage of total revenues  |   |                         | 33     | % |   |   | 30 | % |
|                          |   |                         |   |   |   |   |   |   |

| Research and Development          |   | Three Months Ended March 31, |   |
|-----------------------------------|--------|------------------------------|--------|
|                              |   | 2012                         |   |   | 2011 |   |
|                              |   | ($ in thousands)             |   |
| Research and development expenses |   | $                            | 10,380 |   |   | $ | 8,147 |   |
| Change from prior year period     |   |                         | 27     | % |   |   | 27 | % |
| Percentage of total revenues      |   |                         | 20     | % |   |   | 17 | % |

----

| General and Administrative          |   | Three Months Ended March 31, |   |
|-------------------------------------|--------|------------------------------|--------|
|                                |   | 2012                         |   |   | 2011 |   |
|                                |   | ($ in thousands)             |   |
| General and administrative expenses |   | $                            | 6,888  |   |   | $ | 5,095 |   |
| Change from prior year period       |   |                         | 35     | % |   |   | 33 | % |
| Percentage of total revenues        |   |                         | 13     | % |   |   | 11 | % |

|                                             |   | Three Months Ended March 31, |   |
|--------------------------------------------------|--------|------------------------------|--------|
|                                             |   | 2012                         |   |   | 2011 |   |
|                                             |   | ($ in thousands)             |   |
| Cash, cash equivalents and investments (average) |   | $                            | 90,801 |   |   | $ | 88,879 |   |
| Interest income, gross                           |   |                         | 182    |   |   |   | 43 |   |
| Return on investments                            |   |                         | 0.80   | % |   |   | 0.19 | % |

| Other Expense, Net |   | Three Months Ended March 31, |   |
|--------------------|--------|------------------------------|--------|
|               |   | 2012                         |   |   | 2011 |   |
|               |   | ($ in thousands)             |   |
| Other expense, net |   | $                            | (184   | ) |   | $ | (166 | ) |

| Income Tax Expense |   | Three Months Ended March 31, |   |
|--------------------|--------|------------------------------|--------|
|               |   | 2012                         |   |   | 2011 |   |
|               |   | ($ in thousands)             |   |
| Income tax expense |   | $                            | 85     |   |   | $ | 1,704 |   |

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|                      |   | March 31,2012    |   |   | December 31,2011 |   |
|---------------------------|--------|------------------|--------|--------|------------------|--------|
|                      |   | ($ in thousands) |   |
| Cash and cash equivalents |   | $                | 25,616 |   |             | $      | 28,465 |   |
| Short-term investments    |   |             | 39,076 |   |             |   | 40,589 |   |
| Long-term investments     |   |             | 24,440 |   |             |   | 23,415 |   |
| Total liquidity           |   | $                | 89,132 |   |             | $      | 92,469 |   |

|                                  |   | Three Months EndedMarch 31, |   |
|---------------------------------------|--------|-----------------------------|--------|
|                                  |   | 2012                        |   |   | 2011 |   |
|                                  |   |                        |   |
| Beginning cash and cash equivalents   |   | $                           | 28,465 |   |   | $ | 48,300 |   |
| Cash provided by operating activities |   |                        | 4,419  |   |   |   | 6,667 |   |
| Cash used in investing activities     |   |                        | (9,003 | ) |   |   | (7,936 | ) |
| Cash provided by financing activities |   |                        | 1,735  |   |   |   | 4,839 |   |
| Ending cash and cash equivalents      |   | $                           | 25,616 |   |   | $ | 51,870 |   |

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| Item 3. | Quantitative and Qualitative Disclosures about Market Risk. |
|---------|-------------------------------------------------------------|

| Item 4. | Controls and Procedures. |
|---------|--------------------------|

----

| Item 1. | Legal Proceedings. |
|---------|--------------------|

| Item 1A. | Risk Factors. |
|----------|---------------|

| Item 6. | Exhibits. |
|---------|-----------|

|   | (a) | Exhibits |
|--------|-----|----------|

|           |   |                | Incorporated by Reference                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                               |                                          |      |
|----------------|--------|---------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------|-----------------------------------------------|-----------|
| Exhibit Number |   | Exhibit Description | Form                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | Exhibit                            | Filing Date                                   |      | Filed Herewith |   |
|           | 3.1    |                | Articles of Incorporation of the Company, as currently in effect                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | S-4/A(Registration No. 333-173435) | Annex II to the Proxy Statement / Prospectus  | 4/27/2011 |   |   |   |
|           |   |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                               |                                          |      |   |   |   |
|           | 3.2    |                | By-Laws of the Company, as currently in effect                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | S-4/A(Registration No. 333-173435) | Annex III to the Proxy Statement / Prospectus | 4/27/2011 |   |   |   |
|           |   |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                               |                                          |      |   |   |   |
|           | 10.1   |                | 401(k) Savings Plan, as amended and restated                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                               |                                          |      |   |  # |   |
|           |   |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                               |                                          |      |   |   |   |
|           | 31.1   |                | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                 |                               |                                          |      |   | X |   |
|           |   |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                               |                                          |      |   |   |   |
|           | 31.2   |                | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                 |                               |                                          |      |   |  X |   |
|           |   |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                               |                                          |      |   |   |   |
|           | 32.1   |                | Certification of the Chief Executive Officer, pursuant to 18 U. S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                       |                               |                                          |      |   | X |   |
|           |   |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                               |                                          |      |   |   |   |
|           | 32.2   |                | Certification of the Chief Financial Officer, pursuant to 18 U. S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                       |                               |                                          |      |   |  X |   |
|           |   |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                               |                                          |      |   |   |   |
|           | 101    |                | The following materials from Interactive Intelligence Group, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, formatted in XBRL (eXtensible Business Reporting language):  (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Income and Comprehensive Income; (iii) Condensed Consolidated Statement of Shareholders’ Equity; (iv) Condensed Consolidated Statements of Cash Flows; and (v) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text. |                               |                                          |      |   |  # |   |

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|                                 |   |   |   |   |   | Interactive Intelligence Group, Inc.(Registrant) |
|--------------------------------------|--------|--------|--------|--------|--------|--------------------------------------------------|
|                                 |   |   |   |   |   |                                             |   |   |
| Date:   June 22, 2012 |   |   |   | By:    |   | /s/ Stephen R. Head                              |
|                                 |   |   |   |   |   |                                             |   | Stephen R. HeadChief Financial Officer, Senior Vice President of Finance and Administration,Secretary and Treasurer(Principal Financial Officer and Principal Accounting Officer) |

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