##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q





QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED March 31, 2008

COMMISSION FILE NUMBER: 000-24539

ECLIPSYS CORPORATION

(Exact name of registrant as specified in its charter)



|                         |  |                                     
|------------------------ |  | ------------------------------------
|Delaware                 |  | 65-0632092                          
|(State of Incorporation) |  | (IRS Employer Identification Number)

Three Ravinia Drive

Atlanta, GA

30346

(Address of principal executive offices)

(404) 847-5000

(Telephone number of registrant)

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 whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.

Large accelerated filer  x                    Accelerated
filer   ̈                    Non-accelerated filer   ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes   ̈    No  x

Indicate the number of shares outstanding of each of the issuers classes of common stock as of the latest practicable date.



|                             |  |                                     
|---------------------------- |  | ------------------------------------
|Class                        |  | Shares outstanding as of May 5, 2008
|Common Stock, $.01 par value |  | 54,360,832                          









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##### Table of Contents

ECLIPSYS CORPORATION AND SUBSIDIARIES

FORM 10-Q

For the period ended March 31, 2008

Table of Contents



|               |  |                                                                                                                            |  |   
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------- |  | --
|Part I.        |  | Financial Information                                                                                                      |  | 3 
|               |  |                                                                                                                           
|Item 1.        |  | Financial Statements - Unaudited                                                                                           |  |   
|               |  |                                                                                                                           
|               |  | Condensed Consolidated Balance Sheets (unaudited) - As of March 31, 2008 and December 31, 2007                             |  | 3 
|               |  |                                                                                                                           
|               |  | Condensed Consolidated Statements of Operations (unaudited) - For the Three Months Ended March 31, 2008 and March 31, 2007 |  | 4 
|               |  |                                                                                                                           
|               |  | Condensed Consolidated Statements of Cash Flows (unaudited) - For the Three Months Ended March 31, 2008 and March 31, 2007 |  | 5 
|               |  |                                                                                                                           
|               |  | Notes to Condensed Consolidated Financial Statements (unaudited)                                                           |  | 6 
|               |  |                                                                                                                           
|Item 2.        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                      |  | 15
|               |  |                                                                                                                           
|Item 3.        |  | Quantitative and Qualitative Disclosures About Market Risk                                                                 |  | 22
|               |  |                                                                                                                           
|Item 4.        |  | Controls and Procedures                                                                                                    |  | 22
|               |  |                                                                                                                           
|Part II.       |  | Other Information                                                                                                          |  | 24
|               |  |                                                                                                                           
|Item 1.        |  | Legal Proceedings                                                                                                          |  | 24
|               |  |                                                                                                                           
|Item 1A.       |  | Risk Factors                                                                                                               |  | 24
|               |  |                                                                                                                           
|Item 5.        |  | Other Information                                                                                                          |  | 34
|               |  |                                                                                                                           
|Item 6.        |  | Exhibits                                                                                                                   |  | 34
|               | 
|Signatures     |  | 35                                                                                                                        
|               | 
|Certifications |  |                                                                                                                           



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##### Table of Contents

PART I - FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------

ECLIPSYS CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)



|                                                                                                                             |  |               |          |   |                  |   |          |  
|---------------------------------------------------------------------------------------------------------------------------- |  | ------------- | -------- | - | ---------------- | - | -------- | -
|                                                                                                                             |  | March 31,2008 |          |   | December 31,2007 |  
|                                                                                                                             |  | (Unaudited)   |          |   |                  |  
|Assets                                                                                                                       |  |               |          |   |                  |   |          |  
|Current assets:                                                                                                              |  |               |          |   |                  |   |          |  
|Cash and cash equivalents                                                                                                    |  | $             | 46,198   |   |                  | $ | 22,510   |  
|Marketable securities                                                                                                        |  |               | 19,029   |   |                  |   | 168,925  |  
|Accounts receivable, net of allowance for doubtful accounts of $4,576 and $4,240, respectively                               |  |               | 101,134  |   |                  |   | 99,260   |  
|Prepaid expenses                                                                                                             |  |               | 31,910   |   |                  |   | 27,289   |  
|Deferred tax asset                                                                                                           |  |               | 7,524    |   |                  |   | 7,524    |  
|Other current assets                                                                                                         |  |               | 5,393    |   |                  |   | 1,759    |  
|                                                                                                                             |  |               |          |   |                  |   |          |  
|Total current assets                                                                                                         |  |               | 211,188  |   |                  |   | 327,267  |  
|Long-term investments                                                                                                        |  |               | 112,039  |   |                  |   |         |  
|Property and equipment, net                                                                                                  |  |               | 49,062   |   |                  |   | 45,657   |  
|Capitalized software development costs, net                                                                                  |  |               | 36,308   |   |                  |   | 38,206   |  
|Acquired technology, net                                                                                                     |  |               | 13,453   |   |                  |   | 594      |  
|Intangible assets, net                                                                                                       |  |               | 6,590    |   |                  |   | 1,376    |  
|Deferred tax asset                                                                                                           |  |               | 31,187   |   |                  |   | 31,187   |  
|Goodwill                                                                                                                     |  |               | 40,288   |   |                  |   | 7,772    |  
|Other assets                                                                                                                 |  |               | 12,285   |   |                  |   | 13,374   |  
|                                                                                                                             |  |               |          |   |                  |   |          |  
|Total assets                                                                                                                 |  | $             | 512,400  |   |                  | $ | 465,433  |  
|                                                                                                                             |  |               |          |   |                  |   |          |  
|Liabilities and Stockholders Equity                                                                                         |  |               |          |   |                  |   |          |  
|Current liabilities:                                                                                                         |  |               |          |   |                  |   |          |  
|Deferred revenue                                                                                                             |  | $             | 103,441  |   |                  | $ | 105,115  |  
|Accounts payable                                                                                                             |  |               | 19,594   |   |                  |   | 11,679   |  
|Accrued compensation costs                                                                                                   |  |               | 20,236   |   |                  |   | 24,473   |  
|Note payable                                                                                                                 |  |               | 45,000   |   |                  |   |         |  
|Deferred tax liability                                                                                                       |  |               | 1,845    |   |                  |   | 1,777    |  
|Other current liabilities                                                                                                    |  |               | 19,567   |   |                  |   | 19,381   |  
|                                                                                                                             |  |               |          |   |                  |   |          |  
|Total current liabilities                                                                                                    |  |               | 209,683  |   |                  |   | 162,425  |  
|Deferred revenue                                                                                                             |  |               | 7,632    |   |                  |   | 9,860    |  
|Deferred tax liability                                                                                                       |  |               | 31,235   |   |                  |   | 31,235   |  
|Other long-term liabilities                                                                                                  |  |               | 6,240    |   |                  |   | 3,899    |  
|                                                                                                                             |  |               |          |   |                  |   |          |  
|Total liabilities                                                                                                            |  |               | 254,790  |   |                  |   | 207,419  |  
|Stockholders Equity:                                                                                                        |  |               |          |   |                  |   |          |  
|Common stock, $0.01 par value, 200,000,000 shares authorized; 54,325,760 and 53,806,742 issued and outstanding, respectively |  |               | 543      |   |                  |   | 538      |  
|Additional paid-in capital                                                                                                   |  |               | 524,154  |   |                  |   | 519,112  |  
|Accumulated deficit                                                                                                          |  |               | (263,928 | ) |                  |   | (264,218 | )
|Accumulated other comprehensive income                                                                                       |  |               | (3,159   | ) |                  |   | 2,582    |  
|                                                                                                                             |  |               |          |   |                  |   |          |  
|Total stockholders equity                                                                                                   |  |               | 257,610  |   |                  |   | 258,014  |  
|                                                                                                                             |  |               |          |   |                  |   |          |  
|Total liabilities and stockholders equity                                                                                   |  | $             | 512,400  |   |                  | $ | 465,433  |  
|                                                                                                                             |  |               |          |   |                  |   |          |  

The accompanying notes are an integral part of these unaudited condensed consolidated financial
statements.



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ECLIPSYS CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except per share amounts)



|                                           |  |                             |         |   |      |   |        
|------------------------------------------ |  | --------------------------- | ------- | - | ---- | - | -------
|                                           |  | Three Months EndedMarch 31,
|                                           |  | 2008                        |         |   | 2007
|Revenues:                                  |  |                             |         |   |      |   |        
|Systems and services                       |  | $                           | 119,138 |   |      | $ | 109,183
|Hardware                                   |  |                             | 5,242   |   |      |   | 3,847  
|                                           |  |                             |         |   |      |   |        
|Total revenues                             |  |                             | 124,380 |   |      |   | 113,030
|Costs and expenses:                        |  |                             |         |   |      |   |        
|Cost of systems and services               |  |                             | 67,560  |   |      |   | 64,493 
|Cost of hardware                           |  |                             | 4,336   |   |      |   | 2,914  
|Sales and marketing                        |  |                             | 20,871  |   |      |   | 18,418 
|Research and development                   |  |                             | 17,154  |   |      |   | 14,258 
|General and administrative                 |  |                             | 10,962  |   |      |   | 7,602  
|In-process research and development charge |  |                             | 850     |   |      |   |       
|Depreciation and amortization              |  |                             | 4,766   |   |      |   | 4,439  
|                                           |  |                             |         |   |      |   |        
|Total costs and expenses                   |  |                             | 126,499 |   |      |   | 112,124
|Income (loss) from operations              |  |                             | (2,119  | ) |      |   | 906    
|Gain on sale of assets                     |  |                             | 2,064   |   |      |   |       
|Interest income, net                       |  |                             | 2,119   |   |      |   | 1,514  
|                                           |  |                             |         |   |      |   |        
|Income before taxes                        |  |                             | 2,064   |   |      |   | 2,420  
|Provision for income taxes                 |  |                             | 1,774   |   |      |   | 19     
|                                           |  |                             |         |   |      |   |        
|Net income                                 |  | $                           | 290     |   |      | $ | 2,401  
|                                           |  |                             |         |   |      |   |        
|Income per common share:                   |  |                             |         |   |      |   |        
|Basic income per common share              |  | $                           | 0.01    |   |      | $ | 0.05   
|                                           |  |                             |         |   |      |   |        
|Diluted income per common share            |  | $                           | 0.01    |   |      | $ | 0.04   
|                                           |  |                             |         |   |      |   |        
|Weighted average shares outstanding:       |  |                             |         |   |      |   |        
|Basic                                      |  |                             | 53,548  |   |      |   | 52,328 
|                                           |  |                             |         |   |      |   |        
|Diluted                                    |  |                             | 54,632  |   |      |   | 53,544 
|                                           |  |                             |         |   |      |   |        

The accompanying notes are an integral part of these unaudited condensed consolidated financial
statements.



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ECLIPSYS CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)



|                                                                                  |  |                             |          |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | --------------------------- | -------- | - | ---- | - | ------- | -
|                                                                                  |  | Three Months EndedMarch 31, |         
|                                                                                  |  | 2008                        |          |   | 2007 |  
|Operating activities:                                                             |  |                             |          |   |      |   |         |  
|Net income                                                                        |  | $                           | 290      |   |      | $ | 2,401   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                             |          |   |      |   |         |  
|Depreciation and amortization                                                     |  |                             | 10,188   |   |      |   | 9,671   |  
|Provision for bad debt                                                            |  |                             | 950      |   |      |   | 450     |  
|In-process research and development                                               |  |                             | 850      |   |      |   |        |  
|Stock compensation expense                                                        |  |                             | 3,347    |   |      |   | 2,760   |  
|Gain on sale of marketable securities                                             |  |                             |         |   |      |   | (23     | )
|Gain on sale of assets                                                            |  |                             | (2,064   | ) |      |   |        |  
|Deferred provision for income taxes                                               |  |                             | 68       |   |      |   | 19      |  
|Changes in operating assets and liabilities:                                      |  |                             |          |   |      |   |         |  
|Accounts receivable                                                               |  |                             | (2,092   | ) |      |   | 3,696   |  
|Prepaid expenses and other current assets                                         |  |                             | (6,000   | ) |      |   | (5,616  | )
|Inventory                                                                         |  |                             |         |   |      |   | 825     |  
|Other assets                                                                      |  |                             | 534      |   |      |   | 653     |  
|Deferred revenue                                                                  |  |                             | (3,351   | ) |      |   | (2,223  | )
|Accrued compensation                                                              |  |                             | (4,537   | ) |      |   | 5,479   |  
|Accounts payable and other current liabilities                                    |  |                             | 5,952    |   |      |   | (7,768  | )
|Other long-term liabilities                                                       |  |                             | 2,343    |   |      |   | 19      |  
|Other reconciling items                                                           |  |                             | 427      |   |      |   |        |  
|                                                                                  |  |                             |          |   |      |   |         |  
|Total adjustments                                                                 |  |                             | 6,615    |   |      |   | 7,942   |  
|                                                                                  |  |                             |          |   |      |   |         |  
|Net cash provided by operating activities                                         |  |                             | 6,905    |   |      |   | 10,343  |  
|                                                                                  |  |                             |          |   |      |   |         |  
|Investing activities:                                                             |  |                             |          |   |      |   |         |  
|Purchases of property and equipment                                               |  |                             | (6,940   | ) |      |   | (2,771  | )
|Purchase of marketable securities                                                 |  |                             | (102,000 | ) |      |   | (25,744 | )
|Proceeds from sales of marketable securities                                      |  |                             | 134,791  |   |      |   | 18,060  |  
|Capitalized software development costs                                            |  |                             | (2,923   | ) |      |   | (4,379  | )
|Proceeds from sale of assets                                                      |  |                             | 698      |   |      |   |        |  
|Earnout on disposition                                                            |  |                             | 400      |   |      |   |        |  
|Cash paid for acquisition, net of cash acquired                                   |  |                             | (53,634  | ) |      |   |        |  
|                                                                                  |  |                             |          |   |      |   |         |  
|Net cash used in investing activities                                             |  |                             | (29,608  | ) |      |   | (14,834 | )
|                                                                                  |  |                             |          |   |      |   |         |  
|Financing activities:                                                             |  |                             |          |   |      |   |         |  
|Proceeds from stock options exercised                                             |  |                             | 1,486    |   |      |   | 4,131   |  
|Proceeds from employee stock purchase plan                                        |  |                             | 169      |   |      |   |        |  
|Proceeds from secured financing                                                   |  |                             | 45,000   |   |      |   |        |  
|                                                                                  |  |                             |          |   |      |   |         |  
|Net cash provided by financing activities                                         |  |                             | 46,655   |   |      |   | 4,131   |  
|                                                                                  |  |                             |          |   |      |   |         |  
|Effect of exchange rates on cash and cash equivalents                             |  |                             | (264     | ) |      |   | 2       |  
|                                                                                  |  |                             |          |   |      |   |         |  
|Net increase (decrease) in cash and cash equivalents                              |  |                             | 23,688   |   |      |   | (358    | )
|Cash and cash equivalents  beginning of period                                   |  |                             | 22,510   |   |      |   | 41,264  |  
|                                                                                  |  |                             |          |   |      |   |         |  
|Cash and cash equivalents  end of period                                         |  | $                           | 46,198   |   |      | $ | 40,906  |  
|                                                                                  |  |                             |          |   |      |   |         |  

The accompanying notes are an integral part of these unaudited condensed consolidated financial
statements.



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ECLIPSYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Thousands,
Except Share and Per Share Amounts and as Otherwise Indicated)

(Unaudited)



NOTE A  PREPARATION OF INTERIM FINANCIAL STATEMENTS

In this report, Eclipsys Corporation and its subsidiaries are referred to as we, the Company, or Eclipsys.

The accompanying unaudited condensed consolidated financial statements have been prepared based upon Securities and Exchange Commission (SEC) rules that
permit reduced disclosure for interim periods. In our opinion, these statements include all adjustments necessary for a fair presentation of the results of the interim periods presented. All adjustments are of a normal recurring nature. The year-end
condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

Revenues, expenses, assets, and liabilities can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be
indicative of annual results. For a more complete discussion of our significant accounting policies and other information, you should read this report in conjunction with the consolidated financial statements included in our annual report on Form
10-K for the year ended December 31, 2007 that was filed with the SEC on February 29, 2008.

The Company manages its business as one reportable
segment. Prior period reclassifications were made to expense line items to conform to current period presentation.

NOTE B  RECENTLY ISSUED
ACCOUNTING PRONOUNCEMENTS

Recently Issued Standards

In March 2008, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 161, Disclosures about Derivative Instruments and Hedging Activities  An
Amendment of SFAS No. 133 (SFAS 161). SFAS 161 seeks to improve financial reporting for derivative instruments and hedging activities by requiring enhanced disclosures regarding the impact on financial position, financial
performance, and cash flows. To achieve this increased transparency, SFAS 161 requires (1) the disclosure of the fair value of derivative instruments and gains and losses in a tabular format; (2) the disclosure of derivative features that
are credit risk-related; and (3) cross-referencing within the footnotes. SFAS 161 is effective for us on January 1, 2009. We currently do not believe this standard will have a material impact on our Consolidated Financial Statements.

In December 2007, the FASB issued SFAS No. 141 (Revised 2007), Business Combinations (SFAS 141R). SFAS 141R continues to
require the purchase method of accounting to be applied to all business combinations, but it significantly changes the accounting for certain aspects of business combinations. Under SFAS 141R, an acquiring entity will be required to recognize all
the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. SFAS 141R will change the accounting treatment for certain specific acquisition related items including: (1) expensing
acquisition related costs as incurred; (2) valuing noncontrolling interests at fair value at the acquisition date; and (3) expensing restructuring costs associated with an acquired business. SFAS 141R also includes a substantial number of
new disclosure requirements. SFAS 141R is to be applied prospectively to business combinations for which the acquisition date is on or after January 1, 2009.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements (SFAS 160). SFAS 160 establishes new accounting and reporting standards for the noncontrolling
interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary (minority interest) is an ownership interest in the consolidated entity that should be reported as equity in the
consolidated financial statements and separate from the parent companys equity. This statement is effective for us on January 1, 2009. We currently do not believe this standard will have a material impact on our consolidated financial
statements.

Recently Adopted Standards

In February
2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (SFAS 159). SFAS 159 allows entities to voluntarily choose to measure certain financial assets and liabilities at
fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, SFAS 159 specifies
that unrealized gains and losses for that instrument be



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ECLIPSYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Thousands,
Except Share and Per Share Amounts and as Otherwise Indicated)

(Unaudited)



reported in earnings at each subsequent reporting date. SFAS 159 was effective for us on January 1, 2008. We did not apply the fair value option to any
of our outstanding instruments and, therefore, SFAS 159 did not have an impact on our Condensed Consolidated Financial Statements.

In September 2006, the
FASB issued SFAS No. 157, Fair Value Measurements (SFAS No. 157), which defines fair value, establishes a framework and gives guidance regarding the methods used for measuring fair value, and expands disclosures about fair
value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods of those fiscal years. We adopted SFAS 157 on January 1, 2008. Our most
significant asset that is adjusted to fair value on a recurring basis is our marketable securities and investments.

The following table summarizes our
financial assets measured at fair value on a recurring basis in accordance with SFAS 157 as of March 31, 2008 (in thousands):



|                        |  |                             |         |                                                             |   |                                             |  |                             |        |  |   |        
|----------------------- |  | --------------------------- | ------- | ----------------------------------------------------------- | - | ------------------------------------------- |  | --------------------------- | ------ |  | - | -------
|                        |  | Balance as ofMarch 31, 2008 |         | Quoted Prices inActive Markets forIdentical Assets(Level 1) |   | Significant OtherObservable Inputs(Level 2) |  | UnobservableInputs(Level 3)
|Cash equivalents:       |  |                             |         |                                                             |   |                                             |  |                             |        |  |   |        
|Money market funds      |  | $                           | 40,360  |                                                             | $ | 40,360                                      |  |                             |        |  |   |        
|Marketable securities:  |  |                             |         |                                                             |   |                                             |  |                             |        |  |   |        
|Auction rate securities |  |                             | 18,875  |                                                             |   |                                             |  |                             | 18,875 |  |   |        
|Treasuries              |  |                             | 154     |                                                             |   | 154                                         |  |                             |        |  |   |        
|Other assets(1):        |  |                             |         |                                                             |   |                                             |  |                             |        |  |   |        
|Money market funds      |  |                             | 2,015   |                                                             |   | 2,015                                       |  |                             |        |  |   |        
|Long-term investments:  |  |                             |         |                                                             |   |                                             |  |                             |        |  |   |        
|Auction rate securities |  |                             | 112,039 |                                                             |   |                                             |  |                             |        |  |   | 112,039
|                        |  |                             |         |                                                             |   |                                             |  |                             |        |  |   |        
|Total financial assets  |  | $                           | 173,443 |                                                             | $ | 42,529                                      |  | $                           | 18,875 |  | $ | 112,039
|                        |  |                             |         |                                                             |   |                                             |  |                             |        |  |   |        



|(1) | This money market fund investment is included in other assets because it represents collateral for a letter of credit entered into to secure our obligation under a lease
agreement for our Atlanta location.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The fair value framework prescribed in SFAS 157 requires the categorization of assets into three levels
based upon the assumptions (inputs) used to determine the estimated fair value of the assets. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined
as follows:



| |  |  | Level 1: Unadjusted quoted prices in active markets for identical assets.
| | - |  | -------------------------------------------------------------------------



| |  |  | Level 2: Observable inputs other than those included in Level 1. For example, quoted prices for similar assets in active markets or quotes prices for identical
assets in inactive markets.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 3: Unobservable inputs reflecting managements own assumptions about the inputs used in estimating the value of the asset.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------

Our auction rate securities (ARS) were categorized in the table above based on level 2 and level 3 inputs. ARS of $18.9 million were based on level 2 inputs. ARS of
$112.0 million were based on multiple inputs including trading securities with similar characteristics, similar expected terms, and similar rates generally considered level 2 inputs. Management also developed an assumption to reduce the value of the
ARS for recent market conditions including failed auctions. This assumption, or liquidity discount rate estimate, was highly subjective and therefore is considered a level 3 input in the fair value hierarchy. Although the majority of the inputs used
in valuing our ARS are considered level 2, we categorized $112.0 million of our ARS in the level 3 category. The lowest level of significant valuation input (level 3) was used to determine the categorization in the table above. For additional
information on our investments, see NOTE F.

In February 2008, the FASB released a FASB Staff Position (FSP FAS 157-2Effective Date of FASB
Statement No. 157) which delays the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis
(at least annually) to fiscal years beginning after November 15, 2008. Therefore, in accordance with the aforementioned FASB Staff Position, we have only partially applied FAS 157. Beginning January 1, 2009 we will also apply FAS 157 to all
nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis as required by FAS 157.

NOTE C  EARNINGS PER SHARE

For all periods presented, basic and diluted earnings per common share is presented
in accordance with SFAS 128, Earnings per Share, which provides for the accounting principles used in the calculation of earnings per share. Basic earnings per common share is calculated by dividing net income (loss) available to common
shareholders by the weighted average number of shares of common stock outstanding during the period. Non-vested restricted stock carries dividend and voting rights and, in accordance with Generally Accepted Accounting Principles (GAAP), is not
included in the weighted-average number of common shares outstanding used to compute basic earnings per share. Diluted earnings per common share reflect the potential dilution from assumed conversion of all dilutive securities, such as stock options
and unvested restricted stock, using the treasury stock method. When the effect of the outstanding equity securities is anti-dilutive, they are not included in the calculation of diluted earnings per common share. As of March 31, 2008 and 2007,
$2.7 million and $2.8 million anti-dilutive shares were excluded from the calculation of diluted earnings per common share, respectively. The earnings amounts used for per-share calculations are the same for both the basic and diluted methods.

The computation of basic and diluted income per common share is as follows (in thousands, except per share data):



|                                               |  |                              |     |        |        |                 |   |            |  |        |       |                 |        |  |   |     
|---------------------------------------------- |  | ---------------------------- | --- | ------ | ------ | --------------- | - | ---------- |  | ------ | ----- | --------------- | ------ |  | - | ----
|                                               |  | Three Months Ended March 31,
|                                               |  | 2008                         |     | 2007  
|                                               |  | Net Income                   |     | Shares |        | Per ShareAmount |   | Net Income |  | Shares |       | Per ShareAmount
|Basic earnings per share                       |  | $                            | 290 |        | 53,548 |                 | $ | 0.01       |  | $      | 2,401 |                 | 52,328 |  | $ | 0.05
|Effect of dilutive securities:                 |  |                              |     |        |        |                 |   |            |  |        |       |                 |        |  |   |     
|Incremental shares                             |  |                              |     |        | 1,084  |                 |   |            |  |        |       |                 | 1,149  |  |   |     
|Shares issuable pursuant to earn-out agreement |  |                              |     |        |       |                 |   |            |  |        |       |                 | 67     |  |   |     
|                                               |  |                              |     |        |        |                 |   |            |  |        |       |                 |        |  |   |     
|Diluted earnings per share                     |  | $                            | 290 |        | 54,632 |                 | $ | 0.01       |  | $      | 2,401 |                 | 53,544 |  | $ | 0.04
|                                               |  |                              |     |        |        |                 |   |            |  |        |       |                 |        |  |   |     

NOTE D  ACQUISITION OF ENTERPRISE PERFORMANCE SYSTEMS, INC.

On February 25, 2008, the Company acquired all of the outstanding capital stock of Enterprise Performance Systems, Inc. (EPSi), a private company. The
aggregate purchase price was $56.1 million ($53 million net of cash acquired and transaction costs) and is subject to certain holdback arrangements and working capital adjustments. EPSi is a leading provider of business intelligence solutions,
including web-based software and related consulting services that allow clients in the healthcare industry to improve financial performance and operational decision making.



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ECLIPSYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Thousands,
Except Share and Per Share Amounts and as Otherwise Indicated)

(Unaudited)



We acquired EPSI to strengthen our position in providing clinical, operational and financial performance-improvement
solutions that help organizations manage the business of healthcare. The acquisition enables us to immediately deliver SQL-based Business Decision Support Solutions. Like Eclipsys clinical and access management solutions, EPSis solutions
are based upon the Microsoft SQL platform.

The purchase price has been allocated to the tangible assets, liabilities assumed, and identifiable intangible
assets acquired based on their estimated fair values on the acquisition date. The excess of the purchase price over the aggregate fair values was recorded as goodwill. The fair value assigned to identifiable intangible assets acquired is determined
using the income approach, which discounts expected future cash flows to present value using estimates and assumptions determined by management. Purchased intangible assets are amortized on a straight-line basis over the respective useful lives
based on an assessed pattern of use. For accounting purposes, the purchase price is $56.1 million which includes $0.7 million of transaction costs and cash acquired. Approximately $0.9 million of the purchase price was allocated to in process
research and development and was charged to our income statement in the first quarter 2008. The remaining preliminary allocation of the purchase price is summarized below (in thousands):



|                                      |  |                    |        |                       |       
|------------------------------------- |  | ------------------ | ------ | --------------------- | ------
|                                      |  | $ AllocationAmount |        | EstimatedUseful Lives
|Net cash and tangible assets acquired |  | $                  | 3,317  |                       |       
|Customer relationships                |  |                    | 4,600  |                       | 6 yrs.
|Non-Compete agreements                |  |                    | 1,210  |                       | 3 yrs.
|Acquired technology                   |  |                    | 13,260 |                       | 4 yrs.
|Goodwill                              |  |                    | 32,874 |                       |       
|                                      |  |                    |        |                       |       
|Purchase Price                        |  | $                  | 55,261 |                       |       
|                                      |  |                    |        |                       |       

For the three months ended March 31, 2008, we recorded amortization expense of $0.4 million related to
intangible assets acquired in the EPSi acquisition.

NOTE E  ACCOUNTS RECEIVABLE

Accounts receivable, net of an allowance for doubtful accounts, is comprised of the following (in thousands):



|                                  |  |               |         |                  |   |       
|--------------------------------- |  | ------------- | ------- | ---------------- | - | ------
|                                  |  | March 31,2008 |         | December 31,2007
|Accounts Receivable:              |  |               |         |                  |   |       
|Billed accounts receivable, net   |  | $             | 71,731  |                  | $ | 75,164
|Unbilled accounts receivable, net |  |               | 29,403  |                  |   | 24,096
|                                  |  |               |         |                  |   |       
|Total accounts receivable, net    |  | $             | 101,134 |                  | $ | 99,260
|                                  |  |               |         |                  |   |       



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ECLIPSYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Thousands,
Except Share and Per Share Amounts and as Otherwise Indicated)

(Unaudited)



NOTE F  INVESTMENTS

Investment balances consist of the following (in thousands):



|                        |  |               |         |                  |   |        
|----------------------- |  | ------------- | ------- | ---------------- | - | -------
|                        |  | March 31,2008 |         | December 31,2007
|Security Type:          |  |               |         |                  |   |        
|Auction rate securities |  |               | 130,914 |                  |   | 166,217
|Other securities (1)    |  |               | 154     |                  |   | 2,708  
|                        |  |               |         |                  |   |        
|Total                   |  | $             | 131,068 |                  | $ | 168,925
|                        |  |               |         |                  |   |        



|(1) | As of March 31, 2008 the maturity date of other securities is less than one year.
|--- | ---------------------------------------------------------------------------------

As of March 31, 2008, the Company held approximately $135.4 million par value of its investments in auction-rate securities (ARS). Our ARS are comprised of certain AAA rated notes with
long-term nominal maturities for which the interest rates are reset through a dutch auction each month. The monthly auctions historically have provided a liquid market for these securities.

In February 2008, the broker-dealers managing the Companys ARS portfolio experienced failed auctions of certain of these securities where the amount of securities
submitted for sale exceeded the amount of purchase orders. Our ARS continued to fail to settle at auctions through the first quarter 2008. This indicates the estimated fair value of these ARS no longer approximates their par value. Accordingly, at
March 31, 2008, the Company has recorded these investments at their estimated fair value of $130.9 million and recorded a temporary loss on these securities of $4.9 million in accumulated other comprehensive income, reflecting the
decline in the fair value of these securities. The Company has concluded that no other-than-temporary impairment losses occurred in the three months ended March 31, 2008 because the Company believes that the declines in fair value that occurred
during 2008 are due to general market conditions, these investments continue to be of high credit quality, and the Company has the intent and ability to hold these investments until the anticipated recovery in market value occurs. The Company will
continue to analyze its auction rate securities each reporting period for impairment and it may be required to record an impairment charge in the Consolidated Statement of Operations if the decline in fair value is determined to be
other-than-temporary. The fair value of these securities has been estimated by management based on the assumptions that market participants would use in pricing the asset in a current transaction in accordance with SFAS 157 Fair Value
Measurements. The estimates of the fair value of the ARS we hold could change significantly based on market conditions.

We currently plan to hold
the ARS until such time as successful auctions would occur or the secondary market allows for a sufficient price to recover substantially all of our carrying value. There can be no assurance this will occur. Accordingly, we have reclassified
$112.0 million of these securities as long-term in our consolidated balance sheet.

The Company continues to earn interest on these investments at the
contractual rate, and the ARS the Company holds have not been downgraded or placed on credit watch by credit rating agencies. In April, a partial call transaction was closed related to one of our ARS securities, as a result of which we received
proceeds of $4.6 million. Additionally in April, another call was initiated by an ARS issuer, of which we hold approximately $14.3 million of securities. This transaction is expected to close mid-second quarter 2008; however, there can be no
assurance that this transaction will close.



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ECLIPSYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Thousands,
Except Share and Per Share Amounts and as Otherwise Indicated)

(Unaudited)



NOTE G  ACQUIRED TECHNOLOGY AND INTANGIBLE ASSETS, INCLUDING GOODWILL

The changes in the carrying amount of goodwill for the three month period ended March 31, 2008 was as follows:



|                                    |  |   |        |  
|----------------------------------- |  | - | ------ | -
|Beginning Balance December 31, 2007 |  | $ | 7,772  |  
|EPSi acquistion                     |  |   | 32,874 |  
|Other                               |  |   | (358   | )
|                                    |  |   |        |  
|Ending Balance March 31, 2008       |  | $ | 40,288 |  
|                                    |  |   |        |  

The gross and net amounts for acquired technology, ongoing customer relationships and goodwill consist of the
following (in thousands):



|                                         |  |                     |        |                         |   |               |              |  |                     |        |                         |   |       |              |   |        |   |  |   |       |  |          
|---------------------------------------- |  | ------------------- | ------ | ----------------------- | - | ------------- | ------------ |  | ------------------- | ------ | ----------------------- | - | ----- | ------------ | - | ------ | - |  | - | ----- |  | ---------
|                                         |  | March 31, 2008      |        | December 31, 2007       |   | EstimatedLife
|                                         |  | GrossCarryingAmount |        | AccumulatedAmortization |   |               | NetBookValue |  | GrossCarryingAmount |        | AccumulatedAmortization |   |       | NetBookValue |  
|Intangibles subject to amortization      |  |                     |        |                         |   |               |              |  |                     |        |                         |   |       |              |   |        |   |  |   |       |  |          
|Acquired technology                      |  | $                   | 15,227 |                         | $ | (1,774        | )            |  | $                   | 13,453 |                         | $ | 1,967 |              | $ | (1,373 | ) |  | $ | 594   |  | 3-4 years
|Ongoing customer relationships           |  |                     | 5,909  |                         |   | (491          | )            |  |                     | 5,418  |                         |   | 2,404 |              |   | (1,028 | ) |  |   | 1,376 |  | 5-6 years
|Other                                    |  |                     | 1,210  |                         |   | (38           | )            |  |                     | 1,172  |                         |   |      |              |   |       |   |  |   |      |  | 3 years  
|                                         |  |                     |        |                         |   |               |              |  |                     |        |                         |   |       |              |   |        |   |  |   |       |  |          
|Total                                    |  | $                   | 22,346 |                         | $ | (2,303        | )            |  | $                   | 20,043 |                         | $ | 4,371 |              | $ | (2,401 | ) |  | $ | 1,970 |  |          
|                                         |  |                     |        |                         |   |               |              |  |                     |        |                         |   |       |              |   |        |   |  |   |       |  |          
|Intangibles not subject to amortization: |  |                     |        |                         |   |               |              |  |                     |        |                         |   |       |              |   |        |   |  |   |       |  |          
|Goodwill                                 |  |                     |        |                         |   |               |              |  | $                   | 40,288 |                         |   |       |              |   |        |   |  | $ | 7,772 |  |          
|                                         |  |                     |        |                         |   |               |              |  |                     |        |                         |   |       |              |   |        |   |  |   |       |  |          

The estimated aggregate amortization expense for each of the five succeeding fiscal years is as follows (in
thousands):



|                           |  |      |       |      |   |       |  |      |       |      |   |       |  |   |       |  |   |       
|-------------------------- |  | ---- | ----- | ---- | - | ----- |  | ---- | ----- | ---- | - | ----- |  | - | ----- |  | - | ------
|                           |  | 2008 |       | 2009 |   | 2010  |  | 2011 |       | 2012 |   | Total
|Total amortization expense |  | $    | 4,400 |      | $ | 4,989 |  | $    | 4,747 |      | $ | 4,315 |  | $ | 1,282 |  | $ | 19,733

NOTE H  SHORT-TERM FINANCING ARRANGEMENT

On February 15, 2008, the Company entered into an agreement with an investment bank, pursuant to which the Company received $45 million in exchange for a transfer to
the bank of ARS with a nominal value of $90 million in the aggregate. The agreement obligated the Company to repay the bank, and the bank to transfer the ARS back to the Company, on May 15, 2008, subject to earlier transfer back to the Company
at the Companys discretion. On May 9, 2008, the Company entered into a credit agreement with Wachovia Bank (see Note MSubsequent Events). The Company used proceeds from the Wachovia agreement to settle the $45 million obligation, and as
a result this short-term financing arrangement has been terminated and the ARS have been returned to the Company.



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ECLIPSYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Thousands,
Except Share and Per Share Amounts and as Otherwise Indicated)

(Unaudited)



The Company originally entered into this arrangement to provide funds to close the February 2008 acquisition of
EPSi. See Note D  Acquisition of Enterprise Performance Systems, Inc.

NOTE I - STOCK COMPENSATION PLANS

2005 Stock Incentive Plan

At our Annual Meeting of Stockholders held
June 29, 2005, our stockholders approved the 2005 Stock Incentive Plan, or the 2005 Plan. Under the 2005 Plan, no further awards will be granted under our prior Stock Incentive Plans which include our 1996, 1998, 1999 and 2000 plans. Awards may
be made under the 2005 Plan for a number of shares (subject to adjustment in the event of stock splits and other similar events) equal to the sum of (1) 2,000,000 shares of the Companys common stock, (2) any shares reserved for
issuance under the Amended and Restated 2000 Stock Incentive Plan that remained available for issuance as of the date the 2005 Plan was approved by our stockholders and (3) any shares subject to outstanding awards under our 1996 Stock Plan, the
Amended and Restated 1998 Stock Incentive Plan, the Amended and Restated 1999 Stock Incentive Plan and the Amended and Restated 2000 Stock Incentive Plan that expire or are terminated, surrendered or canceled without having been fully exercised, are
repurchased or forfeited in whole or part or result in any shares subject to such award not being issued. We expect to satisfy option exercises by issuing the Companys common stock. As of March 31, 2008, there were approximately 426,000
shares available for future issuance under the 2005 Plan.

2005 Inducement Grant Stock Incentive Plan

In October 2005, our Board of Directors approved the 2005 Inducement Grant Stock Incentive Plan (the Inducement Grant Plan) for use in making inducement
grants of stock options and restricted stock to new employees pursuant to the NASDAQ Marketplace Rules. This Inducement Grant Plan was based upon and is substantially similar to our 2005 Stock Incentive Plan as approved by stockholders, except that
eligible recipients are limited to prospective and newly hired employees of the Company, consistent with its purpose as an employment inducement tool.

During the three months ended March 31, 2008, we issued 106,800 stock options and 200,270 shares of restricted stock as inducement grants under the Inducement Grant Plan to founders and employees of EPSi in connection with our
acquisition of EPSi in February 2008.

Awards granted under these plans generally have a contractual life of 7 to 10 years and generally vest over a 4 to 5
year period.



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ECLIPSYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Thousands,
Except Share and Per Share Amounts and as Otherwise Indicated)

(Unaudited)



Stock Option Awards

Stock option awards granted under the plans entitle recipients to purchase shares of Eclipsys common stock within prescribed periods at a price equal to the fair market value on the date of grant. A summary of stock option transactions is
as follows:



|                                              |  |                 |   |  |                              |       |                                                       |      |                                        |   |       
|--------------------------------------------- |  | --------------- | - |  | ---------------------------- | ----- | ----------------------------------------------------- | ---- | -------------------------------------- | - | ------
|                                              |  | Number ofShares |   |  | WeightedAverageExercisePrice |       | Weighted AverageRemaining Contractual Life (in years) |      | AggregateIntrinsic Value(in thousands)
|Outstanding at December 31, 2007              |  | 5,254,121       |   |  | $                            | 16.58 |                                                       | 6.32 |                                        | $ | 45,856
|Options granted                               |  | 680,800         |   |  | $                            | 22.06 |                                                       |      |                                        |   |       
|Options exercised                             |  | (138,709        | ) |  | $                            | 12.13 |                                                       |      |                                        |   |       
|Options canceled                              |  | (110,547        | ) |  | $                            | 19.83 |                                                       |      |                                        |   |       
|                                              |  |                 |   |  |                              |       |                                                       |      |                                        |   |       
|Outstanding at March 31, 2008                 |  | 5,685,665       |   |  | $                            | 17.31 |                                                       | 6.24 |                                        | $ | 19,224
|                                              |  |                 |   |  |                              |       |                                                       |      |                                        |   |       
|Vested and expected to vest at March 31, 2008 |  | 5,500,166       |   |  | $                            | 17.19 |                                                       | 6.20 |                                        | $ | 19,112
|                                              |  |                 |   |  |                              |       |                                                       |      |                                        |   |       
|Exercisable at March 31, 2008                 |  | 2,874,572       |   |  | $                            | 14.32 |                                                       | 4.81 |                                        | $ | 16,616
|                                              |  |                 |   |  |                              |       |                                                       |      |                                        |   |       

As of March 31, 2008, $30.1 million of total unrecognized compensation costs related to stock options is
expected to be recognized over a weighted average period of 3.4 years.

The weighted average fair value of outstanding stock options is estimated at the
date of grant using a Black-Scholes option pricing model. The following are significant weighted average assumptions used for estimating the fair value of the activity under our stock option plans:



|                         |  |                              |   |  |      |  
|------------------------ |  | ---------------------------- | - |  | ---- | -
|                         |  | Three Months Ended March 31, |  
|                         |  | 2008                         |   |  | 2007 |  
|Expected term (in years) |  | 4.58                         |   |  | 6.50 |  
|Risk free interest rate  |  | 2.53                         | % |  | 5.1  | %
|Expected volatility      |  | 51                           | % |  | 78   | %
|Dividend yield           |  | 0                            | % |  | 0    | %

We use the simplified method for estimating our expected term equal to the midpoint between the vesting period and
the contractual term as allowed by Staff Accounting Bulletin 107, Share-Based Payment.

Staff Accounting Bulletin 110, Year-End Help for
Expensing Employee Stock Options, for options granted after December 31, 2007 requires the use of historical data to estimate an expected term unless the company significantly changes the terms of its share-option grants. The grants the
Company issued after December 31, 2007 have a contractual term of 7 years, which differs from the contractual term of the historical grants (generally 10 years). Therefore, we do not have historical data to estimate the expected term for
current option issuances. Accordingly, we continue to use the simplified method. Additionally, this reduction in contractual term has lowered our assumption of expected term.

We currently estimate volatility by using the historical volatility of our common stock.

The risk-free interest rate is
the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term input to the Black-Scholes model.

We estimate forfeitures using a historical forfeiture rate. Our estimate of forfeitures will be adjusted over the requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from our estimate.

Non-Vested Restricted Stock

Non-vested restricted
stock is sometimes granted under the plans. The restrictions lapse on a pro rata basis over a specified period of time, generally four to five years. The grant date fair value per share of non-vested restricted stock, which is the stock price on the
grant date, is expensed on a straight-line basis over the period during which the restrictions lapse. The shares represented by restricted



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ECLIPSYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Thousands,
Except Share and Per Share Amounts and as Otherwise Indicated)

(Unaudited)



stock awards are considered outstanding at the grant date, as the recipients are entitled to dividends and voting rights. A summary of restricted stock award
activity under the plans is presented below:



|                                       |  |                           |   |  |                                       |      
|-------------------------------------- |  | ------------------------- | - |  | ------------------------------------- | -----
|                                       |  | Non-vestedNumber ofShares |   |  | WeightedAverage Grant-Date Fair Value
|Nonvested balance at December 31, 2007 |  | 382,230                   |   |  | $                                     | 18.28
|Awarded                                |  | 384,175                   |   |  |                                       | 22.81
|Vested                                 |  |                          |   |  |                                       |     
|Forfeited                              |  | (2,742                    | ) |  |                                       | 24.71
|                                       |  |                           |   |  |                                       |      
|Nonvested balance at March 31, 2008    |  | 763,663                   |   |  | $                                     | 20.53
|                                       |  |                           |   |  |                                       |      

As of March 31, 2008, $13.2 million of total unrecognized compensation costs related to non-vested stock
awards is expected to be recognized over a weighted average period of 2.9 years.

Stock-Based Compensation Expense

During the three months ended March 31, 2008 and 2007, our stock based compensation expense, as included in each respective expense category, was as follows (in
thousands):



|                                       |  |      |       |      |   |      
|-------------------------------------- |  | ---- | ----- | ---- | - | -----
|                                       |  | 2008 |       | 2007
|Cost of systems & services             |  | $    | 1,608 |      | $ | 1,076
|Sales and marketing                    |  |      | 1,097 |      |   | 970  
|Research and development               |  |      | 302   |      |   | 529  
|General and administrative             |  |      | 340   |      |   | 185  
|                                       |  |      |       |      |   |      
|Total stock-based compensation expense |  | $    | 3,347 |      | $ | 2,760
|                                       |  |      |       |      |   |      

NOTE J  TOTAL COMPREHENSIVE INCOME (LOSS)

The components of total comprehensive income (loss) were as follows (in thousands):



|                                                      |  |                              |        |   |      |   |       |  
|----------------------------------------------------- |  | ---------------------------- | ------ | - | ---- | - | ----- | -
|                                                      |  | Three Months Ended March 31, |       
|                                                      |  | 2008                         |        |   | 2007 |  
|Net income                                            |  | $                            | 290    |   |      | $ | 2,401 |  
|Net change in foreign currency translation adjustment |  |                              | (868   | ) |      |   | 59    |  
|Net change in unrealized gain on investments          |  |                              | (4,873 | ) |      |   | (23   | )
|                                                      |  |                              |        |   |      |   |       |  
|Total comprehensive income (loss)                     |  | $                            | (5,451 | ) |      | $ | 2,437 |  
|                                                      |  |                              |        |   |      |   |       |  

NOTE K - RESTRUCTURING

In October 2007, the Company initiated a restructuring plan to relocate its corporate headquarters from Boca Raton, Florida to Atlanta, Georgia. The intent of the restructuring plan was to consolidate more of the Companys operations
in one location, reduce overhead costs, and provide a more accessible location for existing and potential clients as well as employees. The charges related to this plan primarily consist of severance-related expenses associated with the termination
of impacted employees and include one-time employee-related benefits. The relocation of the corporate headquarters was substantially completed in the first quarter of 2008, with some additional related payments expected to be made during the
remainder of 2008.



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ECLIPSYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Thousands,
Except Share and Per Share Amounts and as Otherwise Indicated)

(Unaudited)



A summary of the restructuring activity related to the relocation of our corporate headquarters is as follows (in
thousands):



|                             |  |                                   |      |  
|---------------------------- |  | --------------------------------- | ---- | -
|                             |  | One-timeEmployee-Related Benefits |     
|Balance at December 31, 2007 |  | $                                 | 977  |  
|Payments                     |  |                                   | (691 | )
|                             |  |                                   |      |  
|Balance at March 31, 2008    |  | $                                 | 286  |  
|                             |  |                                   |      |  

In January 2006, we effected a restructuring of our operations which included a reduction in headcount of
approximately 100 individuals and the reorganization of our Company. In December 2006, we realigned certain management resources and consolidated some facilities to eliminate excess office space. A summary of the restructuring activity related to
our 2006 initiatives for the three month period ended March 31, 2008 is as follows (in thousands):



|                             |  |                                   |      |   |                  |   |      |       |  |   |       |  
|---------------------------- |  | --------------------------------- | ---- | - | ---------------- | - | ---- | ----- |  | - | ----- | -
|                             |  | One-timeEmployee-Related Benefits |      |   | FacilityClosures |   |      | Total | 
|Balance at December 31, 2007 |  | $                                 | 278  |   |                  | $ | 899  |       |  | $ | 1,177 |  
|Payments                     |  |                                   | (159 | ) |                  |   | (220 | )     |  |   | (379  | )
|                             |  |                                   |      |   |                  |   |      |       |  |   |       |  
|Balance at March 31, 2008    |  | $                                 | 119  |   |                  | $ | 679  |       |  | $ | 798   |  
|                             |  |                                   |      |   |                  |   |      |       |  |   |       |  

The remaining liability as of March 31, 2008 is expected to be paid out through 2009.

NOTE L - CONTINGENCIES

In July and August of 2007, four purported
stockholder derivative complaints were filed in the United States District Court for the Southern District of Florida against certain current and former directors and officers of Eclipsys and Eclipsys as a nominal defendant, alleging that during the
period from at least 1999 until 2006 certain of Eclipsys option grants were backdated and that as a result of this alleged backdating the Companys financial statements were misstated, and stock sales by the named defendants constituted
improper insider selling. These complaints were consolidated in November 2007.

On March 20, 2008, the parties to the derivative litigation entered
into a memorandum of understanding setting forth the material terms of an agreement in principle to settle and resolve all claims. The settlement would involve both payments to and recoveries by Eclipsys, with a net cost to the Company of
approximately $0.3 million. The settlement must be approved by the court following notice to stockholders, and if the settlement is not approved, additional costs may be incurred. The Company has also continued to incur defense costs, $1.0
million of which were reimbursed by its insurer during the quarter. The total net expense related to the derivative litigation was $2.0 million for the three months ended March 31, 2008. Additional insurance reimbursement of defense costs
is anticipated but the amounts cannot be determined at this point.

In addition to the foregoing, the Company and its subsidiaries are from time to time
parties to legal proceedings, lawsuits and other claims incident to their business activities. Such matters may include, among other things, assertions of contract breach or intellectual property infringement, claims for indemnity arising in the
course of our business and claims by persons whose employment with us has been terminated. Such matters are subject to many uncertainties and outcomes are not predictable with assurance. Consequently, management is unable to ascertain the ultimate
aggregate amount of monetary liability, amounts which may be covered by insurance or recoverable from third parties, or the financial impact with respect to these matters as of March 31, 2008. However, based on our knowledge as of
March 31, 2008, management believes that the final resolution of such matters pending at the time of this report, individually and in the aggregate, will not have a material adverse effect upon our consolidated financial position, results of
operations or cash flows.

NOTE M - SUBSEQUENT EVENTS

Senior Secured Revolving Credit Facility

On May 9, 2008, the Company entered into a credit agreement with Wachovia Bank, pursuant to which
the Company received a senior secured revolving credit facility in the aggregate principal amount of $50.0 million. The Company entered into this arrangement to obtain funds to repay the $45.0 million short-term financing agreement entered into
February 15, 2008 which was used to provide funds to close the February 2008 acquisition of EPSi. The Companys obligation under the credit agreement is secured by first priority liens and security interests in substantially all of the assets
of the Company and its subsidiaries. The agreement has a one-year term with an interest rate of LIBOR market index rate plus .75%. The Company has borrowed the full $50.0 million available under the facility, with $4.6 million held as cash, net of
$45.1 million principal and interest pay down on the short term facility and $0.3 million of transaction costs.



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|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

This report contains forward-looking statements that are based on our current expectations, assumptions, estimates and projections about our company and our industry. These statements are not guarantees of future
performance and actual outcomes may differ materially from what is expressed or forecasted. When used in this report, the words may, will, should, predict, continue, plans,
expects, anticipates, estimates, intends, believe, could, and similar expressions are intended to identify forward-looking statements. These statements may include, but are not
limited to, statements concerning our anticipated performance, including revenue, margin, cash flow, balance sheet and profit expectations; development and implementation of our software; duration, size, scope and revenue expectations associated
with client contracts; business mix; sales and growth in our client base; market opportunities; industry conditions; and our accounting, including its effects and potential changes in accounting.

Actual results might differ materially from the results projected due to a number of risks and uncertainties, including those described in this report under the heading
Risk Factors and in our other filings we make from time to time with the U.S. Securities and Exchange Commission. Except as required by law, we assume no obligation to publicly update or revise these forward-looking statements for any
reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

Throughout this report we refer to Eclipsys Corporation and its consolidated subsidiaries as Eclipsys, the Company, we,
us, and our.

This discussion and analysis should be read in conjunction with our condensed consolidated financial statements,
including the notes thereto, which are included elsewhere in this document.

EXECUTIVE OVERVIEW

About the Company

Eclipsys is a leading provider of advanced
integrated clinical, revenue cycle and access management software, and professional services that help healthcare organizations improve their clinical, financial, operational and client satisfaction outcomes. We develop and license proprietary
software and content that is designed for use in connection with many of the key clinical, financial and operational functions that healthcare organizations require. Among other things, our software enables physicians, nurses and other clinicians to
coordinate care through shared electronic medical records, place orders and access and share information about patients. Our software helps clients optimize the healthcare revenue cycle, including patient admissions, scheduling, invoicing, inventory
control and cost accounting, in addition to providing records maintenance and assessment of the profitability of specific medical procedures and personnel. Clinical content, which is integrated with our software, provides evidence-based
practice guidelines for use by physicians, nurses and other clinicians.

We also provide professional services related to our software. These services
include software implementation and maintenance, outsourcing, remote hosting of our software as well as third-party healthcare information technology applications, technical and user training and consulting.

Our income statement items of revenue are as follows:



| |  |  | Systems and services revenues include revenues derived from a variety of sources, including software licenses and contractual software maintenance
(under which fees are recognized ratably over the term of the contract), and professional services. Our systems and services revenues include both subscription software license revenues (which are recognized ratably over a contractual
term) and license revenues related to traditional software contracts (which are generally recognized upon delivery of the software and represents less than 10% of total revenues). For some clients, we host the software applications
licensed from us remotely on our own servers, which saves such clients the cost of procuring and maintaining hardware and related facilities. For other clients, we offer an outsourced solution in which we assume partial to total responsibility for a
healthcare organizations information technology operations using our employees. Margins on the license and maintenance revenues are generally significantly higher than those on the professional services revenues.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Hardware revenues result from our sale of computer hardware to our clients in connection with their implementation of our software. We purchase this
hardware from suppliers and resell it to our clients. As clients elect more remote-hosted solutions, clients need for hardware is reduced and future hardware revenues may be negatively impacted. The amount of hardware revenues, and the
proportion of our total revenues that they represent, can vary significantly from period to period. Margins on hardware revenues are generally significantly lower than those on systems and services revenues.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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We market our software to healthcare providers of many different sizes and specialties, including community hospitals,
large multi-entity healthcare systems, academic medical centers, outpatient clinics and physician practices. Most of the top-ranked U.S. hospitals named in U.S. News & World Reports Honor Roll use one or more of our solutions.

We commenced operations in India in 2006 through an acquisition of a small producer of laboratory software. By March 2008, our India operations, now named
Eclipsys (India) Private Limited, have expanded to include two offices and over 400 employees. We believe that India provides access to educated professionals to work on research development and to support our software, at an economically effective
cost.

The decision to exit our networking services business as well as the sale of our Clinical Practice Model Resource Center (CPMRC) business, in 2007,
will result in an aggregate reduction of approximately $20 million, on an annual basis, to the Companys base business revenue stream in 2008 when compared to 2007. We expect to more than offset this loss of revenue with growth in other areas
of the business.

Business Environment

Our industry,
healthcare information technology, is highly competitive and subject to numerous government regulations and industry standards. Sales of Eclipsys solutions can be affected significantly by many competitive factors, including the features and
cost of such solutions compared to the offerings of our competitors, our marketing effectiveness, and the success of our research and development of new solutions. We anticipate that the healthcare information technology industry will continue to
grow and be seen as a way to curb growing healthcare costs while also improving the quality of healthcare.



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##### Table of Contents

Consolidated Results of Operations

Key financial and operating data for Eclipsys Corporation for the three months ended March 31, 2008 and 2007 are as follows (in thousands, except per share amounts):



|                                           |  |               |         |   |                    |       |   |               |   |                    |  |       |            |  |   |            |   |  |        |  
|------------------------------------------ |  | ------------- | ------- | - | ------------------ | ----- | - | ------------- | - | ------------------ |  | ----- | ---------- |  | - | ---------- | - |  | ------ | -
|                                           |  | March 31,2008 |         |   | % of TotalRevenues |       |   | March 31,2007 |   | % of TotalRevenues |  |       | Change ($) |  |   | Change (%) |  
|Revenues                                   |  |               |         |   |                    |       |   |               |   |                    |  |       |            |  |   |            |   |  |        |  
|Systems and services                       |  | $             | 119,138 |   |                    | 95.8  | % |               | $ | 109,183            |  | 96.6  | %          |  | $ | 9,955      |   |  | 9.1    | %
|Hardware                                   |  |               | 5,242   |   |                    | 4.2   | % |               |   | 3,847              |  | 3.4   | %          |  |   | 1,395      |   |  | 36.3   | %
|                                           |  |               |         |   |                    |       |   |               |   |                    |  |       |            |  |   |            |   |  |        |  
|Total revenues                             |  |               | 124,380 |   |                    | 100.0 | % |               |   | 113,030            |  | 100.0 | %          |  |   | 11,350     |   |  | 10.0   | %
|                                           |  |               |         |   |                    |       |   |               |   |                    |  |       |            |  |   |            |   |  |        |  
|Costs and expenses                         |  |               |         |   |                    |       |   |               |   |                    |  |       |            |  |   |            |   |  |        |  
|Cost of systems and services               |  |               | 67,560  |   |                    | 54.3  | % |               |   | 64,493             |  | 57.1  | %          |  |   | 3,067      |   |  | 4.8    | %
|Cost of hardware                           |  |               | 4,336   |   |                    | 3.5   | % |               |   | 2,914              |  | 2.6   | %          |  |   | 1,422      |   |  | 48.8   | %
|Sales and marketing                        |  |               | 20,871  |   |                    | 16.8  | % |               |   | 18,418             |  | 16.3  | %          |  |   | 2,453      |   |  | 13.3   | %
|Research and development                   |  |               | 17,154  |   |                    | 13.8  | % |               |   | 14,258             |  | 12.6  | %          |  |   | 2,896      |   |  | 20.3   | %
|General and administrative                 |  |               | 10,962  |   |                    | 8.8   | % |               |   | 7,602              |  | 6.7   | %          |  |   | 3,360      |   |  | 44.2   | %
|In-process research and development charge |  |               | 850     |   |                    | 0.7   | % |               |   |                   |  | 0.0   | %          |  |   | 850        |   |  | *      |  
|Depreciation and amortization              |  |               | 4,766   |   |                    | 3.8   | % |               |   | 4,439              |  | 3.9   | %          |  |   | 327        |   |  | 7.4    | %
|                                           |  |               |         |   |                    |       |   |               |   |                    |  |       |            |  |   |            |   |  |        |  
|Total costs and expenses                   |  |               | 126,499 |   |                    | 101.7 | % |               |   | 112,124            |  | 99.2  | %          |  |   | 14,375     |   |  | 12.8   | %
|                                           |  |               |         |   |                    |       |   |               |   |                    |  |       |            |  |   |            |   |  |        |  
|Income (loss) from operations              |  |               | (2,119  | ) |                    | -1.7  | % |               |   | 906                |  | 0.8   | %          |  |   | (3,025     | ) |  | -333.9 | %
|Gain on sale of assets                     |  |               | 2,064   |   |                    | 1.7   | % |               |   |                   |  | *     |            |  |   | 2,064      |   |  | *      |  
|Interest income, net                       |  |               | 2,119   |   |                    | 1.7   | % |               |   | 1,514              |  | 1.3   | %          |  |   | 605        |   |  | 40.0   | %
|                                           |  |               |         |   |                    |       |   |               |   |                    |  |       |            |  |   |            |   |  |        |  
|Income before taxes                        |  |               | 2,064   |   |                    | 1.7   | % |               |   | 2,420              |  | 2.1   | %          |  |   | (356       | ) |  | -14.7  | %
|Provision for income taxes                 |  |               | 1,774   |   |                    | 1.4   | % |               |   | 19                 |  | 0.0   | %          |  |   | 1,755      |   |  | *      |  
|                                           |  |               |         |   |                    |       |   |               |   |                    |  |       |            |  |   |            |   |  |        |  
|Net income                                 |  | $             | 290     |   |                    | 0.2   | % |               | $ | 2,401              |  | 2.1   | %          |  | $ | (2,111     | ) |  | -87.9  | %
|                                           |  |               |         |   |                    |       |   |               |   |                    |  |       |            |  |   |            |   |  |        |  
|Basic net income per common share          |  | $             | 0.01    |   |                    |       |   |               | $ | 0.05               |  |       |            |  | $ | (0.04      | ) |  |        |  
|                                           |  |               |         |   |                    |       |   |               |   |                    |  |       |            |  |   |            |   |  |        |  
|Diluted net income per common share        |  | $             | 0.01    |   |                    |       |   |               | $ | 0.04               |  |       |            |  | $ | (0.03      | ) |  |        |  
|                                           |  |               |         |   |                    |       |   |               |   |                    |  |       |            |  |   |            |   |  |        |  



|* | Not meaningful
|- | --------------

Revenues

Total revenues increased by $11.4 million, or 10.0%, for the quarter ended March 31, 2008 compared with the first quarter of 2007. Our acquisition of EPSi in first
quarter of 2008 did not have a significant impact to our first quarter 2008 revenues.

Systems and Services Revenues

Systems and services revenues increased by $10.0 million, or 9.1%, for the quarter ended March 31, 2008 compared with the same period of 2007. The overall increase
resulted from increases of $7.5 million in revenues recognized on a ratable basis and $3.9 million in periodic revenues related to software licenses and other in-period related activities; these increases were partially offset by a decrease of $1.5
million in professional services revenues.

Revenues Recognized Ratably. Revenues recognized ratably from software, maintenance,
outsourcing and remote hosting were $80.7 million, an increase of $7.5 million or 10.3%, when compared to the same period in 2007. The increase was due to higher sales bookings, related to volume increases, in previous periods of our software
and remote hosting related services resulting in growth in our recurring revenue base.

Periodic Revenues. Periodic revenues related
to software related fees, third party software related fees and networking services (only 2007) were $10.3 million for the quarter ended March 31, 2008 compared to $6.4 million for the quarter ended March 31,



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2007, for an increase of $3.9 million from the prior period. The table below summarizes the components of periodic revenues for the three months ended
March 31, 2008 and 2007 (in thousands):



|                                  |  |                             |        |        |   |       |  |   |        |  
|--------------------------------- |  | --------------------------- | ------ | ------ | - | ----- |  | - | ------ | -
|                                  |  | Three Months EndedMarch 31, |        | Change |  
|                                  |  | 2008                        |        | 2007   |  
|Eclipsys software related fees    |  | $                           | 8,337  |        | $ | 2,645 |  | $ | 5,692  |  
|Third party software related fees |  |                             | 1,916  |        |   | 1,157 |  |   | 759    |  
|Networking services               |  |                             |       |        |   | 2,560 |  |   | (2,560 | )
|                                  |  |                             |        |        |   |       |  |   |        |  
|Total periodic revenues           |  | $                           | 10,253 |        | $ | 6,362 |  | $ | 3,891  |  
|                                  |  |                             |        |        |   |       |  |   |        |  

The increase in periodic revenues in the first quarter of 2008 as compared to the same period in
2007 was primarily attributable to increased software related fees. In any period, these revenues can be considered one time in nature for that period, and we do not recognize these revenues on a ratable basis. These revenues include periodic
traditional license fees associated with new contracts signed in the period, including add-on licenses to existing clients and new client transactions, as well as revenues from contract backlog that had not previously been recognized pending
contract performance that occurred or was completed during the period, and certain other activities during the period associated with client relationships. In the aggregate, these periodic revenues can contribute significantly to earnings in the
period because relatively little in-period costs are associated with such revenues (other than those costs associated with networking services). We expect these periodic revenues to continue to fluctuate on a yearly basis as a result of significant
variations in the type and magnitude of sales and other contract and client activity in any period, and these variations make it difficult to predict the nature and amount of these periodic revenues. The increase in software related fees in 2008 as
compared to the same period in 2007 is attributed to increased sales of up-front licenses with our clients. Various factors determine whether a particular software sale is structured as an upfront license fee. The decrease in networking services
revenues in the first quarter of 2008 as compared to the first quarter of 2007 is the result of exiting the networking services business.

Professional Services Revenues. Professional services revenues, which include implementation and consulting related services, were $28.2 million, which represented a decrease of $1.5 million or 4.9% compared to the prior period. The
decrease resulted primarily from a $1.2 million decrease in revenues related to the sale of our Clinical Practice Model Resource Center (CPMRC) business in late 2007.

The decision to exit our networking services business as well as the sale of our CPMRC business, in 2007, will result in an aggregate reduction of approximately $20 million to the Companys annual base business
revenue stream in 2008 when compared to 2007. We expect to more than offset this loss of revenues with growth in other areas of the business.

Hardware
Revenues

Hardware revenues increased $1.4 million or 36.3% for the three months ended March 31, 2008 compared to the three months ended
March 31, 2007. During 2007, we exited our networking services business and shifted any residual client network hardware needs to third party hardware providers. This change impacted hardware revenues by $1.8 million for the three months ended
March 31, 2008.

Operating Expenses

Cost of
systems and services increased by $3.1 million, or 4.8%, in the quarter ended March 31, 2008 compared to the first quarter of 2007. The increase in cost of systems and services in 2008 was primarily attributable to the following:



| |  |  | Higher labor related costs of $2.3 million, mainly associated with an increase in headcount and higher incentive compensation on improved financial performance;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Higher third party costs of services of $1.9 million impacted by more contract activity requiring third party services;
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | Higher self-insured medical costs of $0.5 million resulting from higher than usual employee claims activity; and
| | - |  | ----------------------------------------------------------------------------------------------------------------



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| |  |  | Increased capital software amortization of $0.3 million resulting from our release of SunriseXA 5.0 in the fourth quarter of 2007.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------

The increases above were offset by lower consulting and travel costs of $1.2 million reflecting managements continued focus on reducing costs and $0.4 million
related to a reduction in recruiting and professional fees.

Cost of hardware increased $1.4 million or 48.8% for the three months ended March 31,
2008 compared to the three months ended March 31, 2007 as a reflection of the change in our networking services business. During 2007, we exited our networking services business and shifted any residual network hardware activity to third party
hardware providers. This shift created additional hardware costs related to increased third party hardware activity.

Sales and marketing expenses
increased $2.5 million, or 13.3%, in the quarter ended March 31, 2008 compared to the first quarter of 2007. The increase in sales and marketing expenses was primarily due to increased labor-related costs of $1.8 million impacted by wage
increases and incremental headcount as we transitioned our headquarters from Boca Raton to Atlanta. The increase was also related to incremental corporate headquarter rent of $0.3 million. The incremental costs are expected to diminish in the second
quarter.

Research and development costs increased by $2.9 million, or 20.3%, in the quarter ended March 31, 2008 compared to the first quarter of
2007. Research and development expense increased due to a lower amount of internal labor cost capitalization of $1.5 million associated with development work related to SunriseXA 5.0, which we released in December of 2007. Higher salary related
costs of $1.5 million due to higher headcount also impacted the increase in research and development costs. Our gross research and development spending, which consists of research and development expenses and capitalized software development costs,
increased $1.4 million to $20.0 million in the first quarter of 2008 compared to $18.6 million in the first quarter of 2007. This was due primarily to our continued expansion in India.

In summary, research and development expense for the three months ended March 31 were as follows (in thousands):



|                                                       |  |      |        |      |   |         |  |          |          |  |        |  
|------------------------------------------------------ |  | ---- | ------ | ---- | - | ------- |  | -------- | -------- |  | ------ | -
|                                                       |  | 2008 |        | 2007 |   | $Change |  | % Change |         
|Research and development expenses                      |  | $    | 17,154 |      | $ | 14,258  |  | $        | 2,896    |  | 20.31  | %
|Capitalized software development costs                 |  | $    | 2,923  |      | $ | 4,379   |  |          | ($1,456) |  | -33.25 | %
|                                                       |  |      |        |      |   |         |  |          |          |  |        |  
|Gross research and development expenditures            |  | $    | 20,077 |      | $ | 18,637  |  | $        | 1,440    |  | 7.73   | %
|Amortization of capitalized software development costs |  | $    | 4,832  |      | $ | 4,495   |  | $        | 337      |  | 7.50   | %

General and administrative expenses increased by $3.4 million, or 44.2%, in the quarter ended March 31, 2008,
compared to the first quarter of 2007. The increase was primarily related to an increase in legal expense of $1.5 million impacted by the defense and anticipated settlement of the derivative litigation that followed completion of our voluntary stock
option review in May 2007. Additional increases in general and administrative expenses include higher labor-related costs of $1.6 million which includes approximately $0.7 million of incremental salary costs associated with our headquarter location
transition. Associated with this transition, we also had incremental rent costs of $0.3 million recorded in general and administrative expenses.

In-process research and development charges, in the first quarter of 2008, resulted from a write off of in-process research and development activities associated with the acquisition of EPSi in February 2008.

Depreciation and amortization increased by $0.3 million, or 7.4%, for the quarter ended March 31, 2008 compared to the first quarter of 2007. The increase in
depreciation and amortization is attributable primarily to amortization related to intangible assets acquired in the EPSi acquisition and to a lesser extent an increased asset base to support our growing operations.

Gain on Sale of Assets

In the first quarter of 2008 we recorded
additional gain on sale of assets of $2.0 million resulting from the completion of post-closing milestones associated with the fourth quarter 2007 sale of our CPMRC business.

Interest Income, Net

Net interest income increased by $0.6 million, or 40.0%, for the quarter ended March 31,
2008 compared to the first quarter of 2007. The increase was related to higher interest income earned in the quarter due to higher marketable securities investment balances



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reflecting the increase in cash during 2007 as well as higher interest rates on certain of our auction rate securities (ARS). Increases in income were
partially offset by $0.3 million of interest expense incurred on borrowings under the $45 million short-term financing arrangement we entered into in February 2008. Interest income in 2008 is expected to continue to be offset in part by interest
obligations on borrowings under short-term financing arrangements, and any long-term financing arrangements we may enter into in the future. Interest income will be negatively impacted by lower expected interest rates in 2008.

Provision for Income Taxes

Income taxes increased by $1.8 million
for the quarter ended March 31, 2008 compared to the first quarter of 2007. The increase is primarily a result of a charge of approximately $1.5 million recorded as a result of our review of certain state tax positions under the provisions
of FASB Interpretation No. 48 Accounting for Uncertainty in Income Taxes.

As of March 31, 2008, a valuation allowance of
approximately $90.4 million is recorded against the U.S. deferred tax assets that management does not believe are more likely than not to be realized. This determination is based primarily on the Companys recent history of taxable losses,
operating losses and uncertainty with respect to its forecasted results. We will continue to assess the requirement for a valuation allowance on a quarterly basis. Should the Company continue to achieve its 2008 forecasted results, we may determine
from our valuation allowance assessment that the positive evidence outweighs the negative resulting in the release of all or a portion of the allowance.

The Company is currently analyzing its research and development expenditures for eligibility to qualify for a research and development (R&D) tax credit. The Company plans to complete this analysis later in 2008 and as a
result expects to record a deferred tax asset for this potential tax benefit, net of a reduction of a portion of its deferred tax asset for net operating loss carryforwards. The estimated amount of the R&D credit is not determinable at this
time.

LIQUIDITY AND CAPITAL RESOURCES

Overview

Cash and marketable securities at March 31, 2008 were $65.2 million representing a $126.2 million decrease from December 31, 2007. This
decrease primarily reflects the reclassification of $112.0 million of our ARS from marketable securities to a non-current asset. The decrease also includes $53.6 million of net cash used for the EPSi acquisition, partially offset by $45 million of
secured financing proceeds. Additional decreases in cash also include the payout of the 2007 incentive plan and capital expenditures, which include investment in our facilities in Pune, India, investments related to the relocation of our corporate
headquarters, and investments in computer equipment to support our growing operations. Additionally, our temporary decline in value adjustment related to our ARS reduced the carrying amount of our marketable securities in the three months ended
March 31, 2008 by $4.9 million.

2008

During the
three month period ended March 31, 2008, operating activities provided $6.9 million of cash. Cash flow from operating activities reflected income generated from operations of $13.6 million, after adjusting for non cash items of $13.3 million,
which included depreciation and amortization, in process research and development charge, stock compensation, provision for bad debt, non cash tax provision and gain on sale of assets. This was offset in part by a decrease in net working capital of
$7.2 million due primarily to changes in accrued compensation expenses driven by the payout of the 2007 incentive plan and increases in prepaid assets impacted by the timing of annual maintenance payments. These negative working capital items, were
partially offset by positive accounts payable charges impacted by the timing of payments in the fourth quarter 2007 compared to the first quarter 2008. Cash flows were also impacted by payments of $1.1 million in connection with our restructuring
activities.

Investing activities used $29.6 million of cash which included $53.6 million, net of cash acquired for our EPSI acquisition, $6.9 million of
capital expenditures, and $2.9 million for investment in software, partially offset by net sales of marketable securities of $32.8 million. Capital expenditures include investment in our facilities in Pune, India, leasehold improvements in our new
corporate headquarters, and investments in computer equipment to support our growing operations. Financing activities provided cash inflow of $46.7 million, primarily consisting of proceeds of $45.0 million from our secured financing described
further below. We also received $1.5 million from stock option exercises. The amount of cash provided by future stock option exercises is uncertain.

Future Capital Requirements

As of March 31, 2008, our principal source of liquidity is our cash and cash equivalents balances and
marketable securities of $65.2 million. The Company has classified approximately $112.0 million of its ARS as long term. These investments are held in certain AAA rated ARS, which historically have been be sold via dutch auctions every
7, 28, or 35 days creating a short-term instrument.



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However, recent uncertainties in the credit markets have disrupted scheduled auctions, resulting in the Company and other investors deciding to continue to
hold their ARS until auctions successfully recommence or other sources of liquidity for these investments becomes available. We currently plan to hold the ARS until such time as successful auctions would occur or the secondary market allows for a
sufficient price to recover substantially all of our carrying value. There can be no assurance this will occur. In April, a partial call transaction was closed related to one of our ARS securities, as a result of which we received proceeds of $4.6
million. Additionally in April, another call was initiated by an ARS issuer, of which we hold approximately $14.3 million of securities. This transaction is expected to close mid-second quarter 2008, however, there can be no assurance that this
transaction will close. However, we believe that our current cash and cash equivalents combined with our anticipated cash flows from operations will be sufficient to fund our operations for the next twelve months.

Our future cash requirements will depend on a number of factors including, among other things, the timing and level of our new sales volumes, the cost of our development
efforts, the success and market acceptance of our future product releases, and other related items.

The Company also periodically evaluates business
opportunities that fit its strategic plans; such as our February 2008 acquisition of EPSi. If an opportunity requiring significant capital investment were to arise, the Company would seek to finance the opportunity through available cash on hand,
existing financings, issuance of additional shares of its stock or additional sources of financing, as circumstances warrant. However, there can be no assurance that adequate liquidity would be available to finance extraordinary business
opportunities.

In February 2008 we entered into a secured financing agreement with an investment bank, pursuant to which we received $45.0 million in
exchange for a transfer to the bank (as a form of collateral) of ARS with a nominal value of $90.0 million in the aggregate. The Company entered into this arrangement to provide funds to close our February 2008 acquisition of EPSi. On May 9, 2008,
we entered into a credit agreement with Wachovia Bank, pursuant to which the Company received a senior secured revolving credit facility in the aggregate principal amount of $50.0 million. We entered into this arrangement to obtain funds to repay
the $45.0 million short-term financing agreement. The Companys obligation under the credit agreement is secured by first priority liens and security interests in substantially all of the assets of the Company and its subsidiaries. The
agreement has a one-year term with an interest rate of LIBOR market index rate plus .75%.

CRITICAL ACCOUNTING POLICIES

There were no material changes to our critical accounting policies as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2007
filed with the SEC on February 29, 2008.



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|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

We do
not currently use derivative financial instruments or enter into foreign currency hedge transactions. Foreign currency fluctuations through March 31, 2008 have not had a material impact on our financial position or results of operations. We
continually monitor our exposure to foreign currency fluctuations and may use derivative financial instruments and hedging transactions in the future if, in our judgment, the circumstances warrant their use.

We have invested primarily in auction-rate securities (ARS). These ARS are debt instruments with long-term nominal maturities that generally can be sold via
dutch auctions every 7, 28, or 35 days creating a short-term instrument. In February 2008, broker-dealers holding the Companys ARS portfolio experienced failed auctions of certain ARS where the amount of securities submitted for sale exceeded
the amount of related purchase orders. The Company continues to earn interest on these investments at the contractual rate, and the ARS the Company holds have not been downgraded or placed on credit watch by credit rating agencies. During the three
months ended March 31, 2008, we adjusted the carrying amount our ARS to estimated fair market value. The adjustment was recorded in other comprehensive income. If uncertainties in the credit and capital markets continue and these markets
deteriorate further or the Company experiences any rating downgrades on any investments in its portfolio, the Company may incur further temporary impairments or other-than-temporary impairments, which could negatively affect the Companys
financial condition, cash flow and reported earnings.

Investments in both fixed rate and floating rate interest earning instruments carry a degree of
interest rate risk. Fixed rate securities may have their fair market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors,
our future investment income may fall short of expectations due to changes in interest rates or we may suffer losses in principal if forced to sell securities that have seen a decline in market value due to changes in interest rates.

The following table illustrates potential fluctuation in annualized interest income based upon hypothetical values for blended interest rates for hypothetical marketable
securities balances:



|                          |   |  |                                               |         |  |   |         |  |   |        
|------------------------- | - |  | --------------------------------------------- | ------- |  | - | ------- |  | - | -------
|HypotheticalInterest Rate |   |  | Marketable securities balances (in thousands)
|                          |   |  | $                                             | 130,000 |  | $ | 140,000 |  | $ | 150,000
|                          |   |  |                                               |         |  |   |         |  |   |        
|3.5                       | % |  |                                               | 4,550   |  |   | 4,900   |  |   | 5,250  
|4.0                       | % |  |                                               | 5,200   |  |   | 5,600   |  |   | 6,000  
|4.5                       | % |  |                                               | 5,850   |  |   | 6,300   |  |   | 6,750  
|5.0                       | % |  |                                               | 6,500   |  |   | 7,000   |  |   | 7,500  
|5.5                       | % |  |                                               | 7,150   |  |   | 7,700   |  |   | 8,250  
|6.0                       | % |  |                                               | 7,800   |  |   | 8,400   |  |   | 9,000  

We estimate that a one-percentage point decrease in interest rates for our marketable securities portfolio as of
March 31, 2008 would have resulted in a decrease in interest income of $0.3 million for a three month period or $1.3 million for a 12 month period. This sensitivity analysis contains certain simplifying assumptions, including a constant level
and rate of debt securities and an immediate across-the-board increase or decrease in the level of interest rates with no other subsequent changes for the remainder of the period, and it does not consider the impact of changes in the portfolio as a
result of our business needs or as a response to changes in the market. Therefore, although it gives an indication of our exposure to changes in interest rates, it is not intended to predict future results and our actual results will likely vary.



|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

Evaluation of Disclosure Controls
and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of
our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act as of March 31, 2008. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives of ensuring that
information we are required to disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely
decisions regarding required disclosures, and is recorded, processed, summarized and reported, within the time periods specified in the SECs rules and forms. There is no assurance that our disclosure controls and procedures will operate
effectively under all circumstances. Based upon the evaluation described above our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2008, our disclosure controls and procedures were effective at the reasonable
assurance level.



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Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter-ended
March 31, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



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PART II. OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------

The information set forth under Note L -
Contingencies to the unaudited condensed consolidated financial statements of this quarterly report on Form 10-Q is incorporated herein by reference.



|ITEM 1A. | RISK FACTORS
|-------- | ------------

Many risks affect our business. These risks
include, but are not limited to, those described below, each of which may be relevant to decisions regarding ownership of our stock. We have attempted to organize the description of these risks into logical groupings to enhance readability, but
many of the risks interrelate or could be grouped in other ways, so no special significance should be attributed to these groupings. Any of these risks could have a significant adverse effect on our reputation, business, financial condition or
results of operations.

The risk factors below reflect the following updates to the risk factors set forth in our annual report on Form 10-K for the year
ended December 31, 2007: (i) the anticipated settlement of the derivative litigation, in our risk factor titled Our past stock option practices and related accounting issues have caused costly derivative litigation and may result
in additional litigation, regulatory proceedings and governmental enforcement actions;(ii) ongoing auction failures and temporary loss related to our auction rate securities, in our risk factor titled Funds associated with
certain of our investments in auction rate securities may not be liquid or accessible for in excess of 12 months, and our auction rate securities may experience further temporary or other-than-temporary decline in value, which would adversely affect
our financial condition, cash flow and reported earnings; (iii) substantial completion of the relocation of our headquarters to Atlanta, Georgia in the first quarter of 2008, in our risk factor titled If we fail to attract,
motivate and retain highly qualified technical, marketing, sales and management personnel, our ability to execute our business strategy could be impaired; and (iv) the recently announced termination, effective as of the close of
business on May 8, 2008, of our stockholder rights agreement, or poison pill, as part of our ongoing review and improvement of Eclipsys corporate governance, and not in connection with any pending or anticipated transaction,
in our risk factor titled Provisions of our charter documents and Delaware law may inhibit potential acquisition bids that a stockholder may believe is desirable, and the market price of our common stock may be lower as a result.
In addition, we have added a risk factor titled Our commercial credit facility subjects us to operating restrictions and risks of default, due to our implementation of a commercial borrowing arrangement in May 2008.

RISKS RELATING TO DEVELOPMENT AND OPERATION OF OUR SOFTWARE

Our software may not operate properly, which could damage our reputation and impair our sales.

Software development is time
consuming, expensive and complex. Unforeseen difficulties can arise. We may encounter technical obstacles, and it is possible that we could discover additional problems that prevent our software from operating properly. If our software contains
errors or does not function consistent with software specifications or client expectations, clients could assert liability claims against us and/or attempt to cancel their contracts with us. These risks are generally more significant for newer
software, until it has been used for enough time in enough client locations for us to have addressed issues that are discovered through use in disparate circumstances and environments. Due to our development efforts, we generally have
significant software that could be considered relatively new and therefore more vulnerable to these risks, including at present our medication management and ambulatory software, among other things. It is also possible that future releases of
our software, which would typically include additional features, may be delayed or may require additional work to address issues that may be discovered as the software comes into use in our client base. If we fail to deliver software with the
features and functionality promised to our clients, we could be subject to significant contractual damages, face serious harm to our reputation and our results of operations could be negatively impacted.

Our software development efforts may be inefficient or ineffective, which could adversely affect our results of operations.

We strive to develop new software, and improve our existing software to add new features and functionality. We schedule and prioritize these development efforts according
to a variety of factors, including our perceptions of market trends, client requirements, and resource availability. Our software is complex and requires a significant investment of time and resources to develop, test, and introduce into use.
Sometimes this takes longer than we expect. Sometimes we encounter unanticipated difficulties that require us to re-direct or scale-back our efforts. Sometimes we change our plans in response to changes in client requirements, market demands,
resource availability, regulatory requirements, or other factors. All of this can result in acceleration of some initiatives and delay of others. These factors place significant demands upon our software development organization and require complex
planning and decision making. If we make the wrong choices or do not manage our development efforts well, we may fail to produce software that responds appropriately to our clients needs, or we may fail to meet client expectations
regarding new or enhanced features and functionality.



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Market changes or mistaken development decisions could decrease the demand for our software, which could harm our
business and decrease our revenues.

The healthcare information technology market is characterized by rapidly changing technologies, evolving
industry standards and new software introductions and enhancements that may render existing software obsolete or less competitive. Our position in the market could erode rapidly due to the development of regulatory or industry standards that our
software may not fully meet, or due to changes in the features and functions of competing software, as well as the pricing models for such software. Our future success will depend in part upon our ability to enhance our existing software and
services, and to timely develop and introduce competing new software and services with features and pricing that meet changing client and market requirements. As we evolve our offering in an attempt to anticipate and meet market demand, clients and
potential clients may find our software and services less appealing. If software development for the healthcare information technology market becomes significantly more expensive due to changes in regulatory requirements or healthcare industry
practices, or other factors, we may find ourselves at a disadvantage to larger competitors with more financial resources to devote to development. If we are unable to enhance our existing software or develop new software to meet changing client
requirements in a timely manner, demand for our software could suffer.

Our software strategy is dependent on the continued development and support
by Microsoft of its .NET Framework and other technologies.

Our software strategy is substantially dependent upon Microsofts .NET Framework
and other Microsoft technologies. If Microsoft were to cease actively supporting .NET or other technologies, fail to update and enhance them to keep pace with changing industry standards, encounter technical difficulties in the continuing
development of these technologies or make them unavailable to us, we could be required to invest significant resources in re-engineering our software. This could lead to lost or delayed sales, client costs associated with platform changes,
unanticipated development expenses and harm to our reputation, and would cause our financial results and business to suffer.

Any failure by us to
protect our intellectual property, or any misappropriation of it, could enable our competitors to market software with similar features, which could reduce demand for our software.

We are dependent upon our proprietary information and technology. Our means of protecting our proprietary rights may not be adequate to prevent misappropriation. In
addition, the laws of some foreign countries may not enable us to protect our proprietary rights in those jurisdictions. Also, despite the steps we have taken to protect our proprietary rights, it may be possible for unauthorized third parties to
copy aspects of our software, reverse engineer our software or otherwise obtain and use information that we regard as proprietary. In some limited instances, clients can access source-code versions of our software, subject to contractual limitations
on the permitted use of the source code. Furthermore, it may be possible for our competitors to copy or gain access to our content. Although our license agreements with clients attempt to prevent misuse of the source code or trade secrets, the
possession of our source code or trade secrets by third parties increases the ease and likelihood of potential misappropriation of our software. Furthermore, others could independently develop technologies similar or superior to our technology or
design around our proprietary rights.

Failure of security features of our software could expose us to significant expense and harm our reputation.

Clients use our systems to store and transmit highly confidential patient health information. Because of the sensitivity of this information,
security features of our software are very important. If, notwithstanding our efforts, our software security features do not function properly, or client systems using our software are compromised, we could face claims for contract breach,
penalties for violation of applicable laws or regulations, significant costs for remediation and re-engineering to prevent future occurrences, and serious harm to our reputation.

RISKS RELATED TO SALES AND IMPLEMENTATION OF OUR SOFTWARE

The length of our sales and implementation cycles
may adversely affect our future operating results.

We have experienced long sales and implementation cycles. How and when to implement, replace,
expand or substantially modify an information system, or modify or add business processes, are major decisions for healthcare organizations, our target client market. Furthermore, our software generally requires significant capital expenditures by
our clients. The sales cycle for our software ranges from 6 to 18 months or more from initial contact to contract execution. Our implementation cycle has generally ranged from 6 to 36 months from contract execution to completion of
implementation. During the sales and implementation cycles, we will expend substantial time, effort and resources preparing contract proposals, negotiating the contract and implementing the software. We may not realize any revenues to offset these
expenditures and, if we do, accounting principles may not allow us to recognize the revenues during corresponding periods. Additionally, any decision by our clients to delay purchasing or implementing our software would likely adversely affect our
revenues.



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We may experience implementation delays that could harm our reputation and violate contractual commitments.

Some of our software is complex and requires a lengthy and expensive implementation process. Each clients situation is different, and
unanticipated difficulties and delays may arise as a result of failures by us or the client to meet our respective implementation responsibilities or other factors. Because of the complexity of the implementation process, delays are sometimes
difficult to attribute solely to us or the client. Implementation delays could motivate clients to delay payments or attempt to cancel their contracts with us or seek other remedies from us. Any inability or perceived inability to implement our
software consistent with a clients schedule could harm our reputation and be a competitive disadvantage for us as we pursue new business. Our ability to improve sales depends upon many factors, including completion of implementation and
successful use of our new software releases in live environments for clients who achieve success and are willing to become reference sites for us. Implementation also requires our clients to make a substantial commitment of their own time and
resources and to make significant organizational and process changes, and if our clients are unable to fulfill their implementation responsibilities in a timely fashion, our projects may be delayed or become less profitable.

Implementation costs may exceed expectations, which can negatively affect our operating results.

Each clients circumstances may include unforeseen issues that make it more difficult or costly than anticipated to implement our software. We may fail to project,
price or manage our implementation services correctly. If we do not have sufficient qualified personnel to fulfill our implementation commitments in a timely fashion, related revenue may be delayed, and if we must supplement our capabilities
with expensive third-party consultants, our costs will increase.

Our earnings can vary significantly depending on periodic software revenues.

Periodic software revenues includes traditional license fees associated with new contracts signed in the financial reporting period, add-on
licenses to existing clients and new client transactions, as well as revenues from contract backlog that had not previously been recognized pending contract performance that occurred or was completed during the period, and certain other activities
during the period associated with existing client relationships. These periodic revenues generally have high margins given there are relatively little in-period costs associated with such revenues, and we therefore rely upon these revenues as an
important element of our earnings in any period. These periodic revenues can fluctuate as a result of significant variations in the type and magnitude of sales and other contract and client activity in any period, and these variations make it
difficult to predict the nature and amount of these periodic revenues. If periodic software revenues in any period decline from prior periods or fall short of our expectations, our earnings in that period will be adversely affected.

RISKS RELATED TO OUR INFORMATION TECHNOLOGY (IT) OR TECHNOLOGY SERVICES

Various risks could interrupt clients access to their data residing in our service center, exposing us to significant costs.

We provide remote hosting services that involve running our software and third-party vendors software for clients in our Technology Solutions Center. The ability to access the systems and the data the
Technology Solution Center hosts and supports on demand is critical to our clients. Our operations and facilities are vulnerable to interruption and/or damage from a number of sources, many of which are beyond our control, including, without
limitation: (i) power loss and telecommunications failures; (ii) fire, flood, hurricane and other natural disasters; (iii) software and hardware errors, failures or crashes; and (iv) computer viruses, hacking and similar
disruptive problems. We attempt to mitigate these risks through various means including redundant infrastructure, disaster recovery plans, separate test systems and change control and system security measures, but our precautions may not
protect against all problems. If clients access is interrupted because of problems in the operation of our facilities, we could be exposed to significant claims by clients or their patients, particularly if the access interruption is
associated with problems in the timely delivery of medical care. We must maintain disaster recovery and business continuity plans that rely upon third-party providers of related services, and if those vendors fail us at a time that our center
is not operating correctly, we could incur a loss of revenue and liability for failure to fulfill our contractual service commitments. Any significant instances of system downtime could negatively affect our reputation and ability to sell our
remote hosting services.

Any breach of confidentiality of client or patient data in our service center could expose us to significant expense and
harm our reputation.

We must maintain facility and systems security measures to preserve the confidentiality of data belonging to our clients and
their patients that resides on computer equipment in our Technology Solution Center. Notwithstanding the efforts we undertake to protect data, our measures can be vulnerable to infiltration as well as unintentional lapse, and if confidential
information is compromised, we could face claims for contract breach, penalties for violation of applicable laws or regulations, significant costs for remediation and re-engineering to prevent future occurrences, and serious harm to our reputation.



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Recruiting challenges and higher than anticipated costs in outsourcing our clients IT operations may
adversely affect our profitability.

We provide outsourcing services that involve operating clients IT departments using our employees. At the
initiation of these relationships, clients often require us to hire, at substantially the same compensation, the entire IT staff that had been performing the services we take on. In these circumstances, our costs may be higher than we target unless
and until we are able to transition the workforce, methods and systems to a more scalable model. Various factors can make this difficult, including geographic dispersion of client facilities and variation in client needs, IT environments, and
system configurations. Also, under some circumstances, we may incur unanticipated costs as a successor employer by inheriting obligations of that client. Further, facilities management contracts require us to provide the IT services
specified by contract, and in some places it can be difficult to recruit qualified IT personnel. Changes in circumstances or failure to assess the clients environment and scope our services accurately can mean we must hire more staff than
we anticipated in order to meet our responsibilities. If we have to increase salaries or relocate personnel, or hire more people than we anticipated, our costs may increase under fixed fee contracts.

Inability to obtain consents needed from third parties could impair our ability to provide remote IT or technology services.

We and our clients need consent from some third-party software providers as a condition to running their software in our service center, or to allowing our employees who
work in client locations under facilities management arrangements to have access to their software. Vendors refusal to give such consents, or insistence upon unreasonable conditions to such consents, could reduce our revenue opportunities
and make our IT or technology services less viable for some clients.

RISKS RELATED TO THE HEALTHCARE IT INDUSTRY AND MARKET

We operate in an intensely competitive market that includes companies that have greater financial, technical and marketing resources than we do.

We face intense competition in the marketplace. We are confronted by rapidly changing technology, evolving user needs and the frequent introduction of new software to
meet the needs of our current and future clients. Our principal competitors in our software business include Cerner Corporation, Epic Systems Corporation, Medical Information Technology, Inc., GE Healthcare, McKesson Corporation, and Siemens AG.
Other software competitors include providers of practice management, general decision support and database systems, as well as segment-specific applications and healthcare technology consultants. Our services business competes with large
consulting firms such as Deloitte & Touche and Cap Gemini, as well as independent providers of technology implementation and other services. Our outsourcing business competes with large national providers of technology solutions such
as IBM Corporation, Computer Sciences Corp., Perot Systems Corporation, as well as smaller firms. Several of our existing and potential competitors are better established, benefit from greater name recognition and have significantly more
financial, technical and marketing resources than we do. Some competitors, particularly those with a more diversified revenue base or that are privately held, may have greater flexibility than we do to compete aggressively on the basis of
price. Vigorous and evolving competition could lead to a loss of market share or pressure on our prices and could make it more difficult to grow our business profitably.

The principal factors that affect competition within our market include software functionality, performance, flexibility and features, use of open industry standards, speed and quality of implementation and client
service and support, company reputation, price and total cost of ownership. We anticipate continued consolidation in both the information technology and healthcare industries and large integrated technology companies may become more active in
our markets, both through acquisition and internal investment. There is a finite number of hospitals and other healthcare providers in our target market. As costs fall, technology improves, and market factors continue to compel investment
by healthcare organizations in software and services like ours, market saturation may change the competitive landscape in favor of larger competitors with greater scale.

Clients that use our legacy software are vulnerable to sales efforts of our competitors.

A significant part
of our revenue comes from relatively high-margin legacy software that was installed by our clients many years ago. We attempt to convert these clients to our newer generation software, but such conversions may require significant investments of time
and resources by clients. Our competitors also aggressively target these clients. If we are not successful in retaining a large portion of these clients by continuing to support legacy softwarewhich is increasingly expensive to
maintainor by converting them to our newer software, our results of operations will be negatively affected.

The healthcare industry faces
financial constraints that could adversely affect the demand for our software and services.

The healthcare industry faces significant financial
constraints. For example, managed healthcare puts pressure on healthcare organizations to reduce costs, and regulatory changes have reduced Medicare reimbursement to healthcare organizations. In addition, the Fiscal Year 2008 Inpatient Prospective
Payment System Final Rule, published by the Centers for Medicare & Medicaid in the U.S., identified several hospital-acquired conditions the treatment for which will no longer be reimbursed by Medicare, starting in October 2008.
Our software often involves a significant financial commitment by our clients. Our ability to grow our business is largely dependent on our clients information technology budgets. If healthcare information technology spending declines or
increases more slowly than we anticipate, demand for our software could be adversely affected.



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Healthcare industry consolidation could put pressure on our software prices, reduce our potential client base and
reduce demand for our software.

Many healthcare organizations have consolidated to create larger healthcare enterprises with greater market power.
If this consolidation trend continues, it could reduce the size of our target market and give the resulting enterprises greater bargaining power, which may lead to erosion of the prices for our software. In addition, when healthcare organizations
combine they often consolidate infrastructure including IT systems, and acquisitions of our clients could erode our revenue base.

Potential changes
in standards applicable to our software could require us to incur substantial additional development costs.

Integration and
interoperability of the software and systems provided by various vendors are important issues in the healthcare industry. Market forces, regulatory authorities and industry organizations are causing the emergence of standards for software
features and performance that are applicable to us, and conforming to these standards is expected to consume a substantial and increasing portion of our development resources. Healthcare delivery and ultimately the functionality demands of the
electronic health record is now expanding to support community health, public health, public policy and population health initiatives. In addition, interoperability and health information exchange features that support emerging and enabling
technologies are becoming increasingly important to our clients and require large scale product enhancements and redesign.

For example, the Certification
Commission for Healthcare Information Technology, or CCHIT, is developing comprehensive sets of criteria for the functionality, interoperability, and security of healthcare software in the U.S. Achieving CCHIT certification is evolving as a de facto
competitive requirement, resulting in increased research and development and administrative expense to conform to these requirements. Similar dynamics are evolving in international markets. CCHIT requirements may diverge from our softwares
characteristics and our development direction. We may choose not to apply for CCHIT certification of certain modules of our software or to delay applying for certification. The CCHIT application process requires conformity with 100% of all
criteria applicable to each module in order to achieve certification and there is no assurance that we will receive or retain certification for any particular module notwithstanding application. If our software is not consistent with emerging
standards our market position and sales could be impaired and we will have to upgrade our software to remain competitive in the market.

RISKS RELATED
TO OUR BUSINESS STRATEGY

Our business strategy includes expansion into markets outside North America, which will require increased expenditures
and if our international operations are not successfully implemented, such expansion may cause our operating results and reputation to suffer.

We
are working to further expand operations in markets outside North America. There is no assurance that these efforts will be successful. We have limited experience in marketing, selling, implementing and supporting our software abroad. Expansion of
our international sales and operations will require a significant amount of attention from our management, establishment of service delivery and support capabilities to handle that business and commensurate financial resources, and will subject us
to risks and challenges that we would not face if we conducted our business only in the United States. We may not generate sufficient revenues from international business to cover these expenses.

The risks and challenges associated with operations outside the United States may include: the need to modify our software to satisfy local requirements, including
associated expenses and time delays; laws and business practices favoring local competitors; compliance with multiple, conflicting and changing governmental laws and regulations, including healthcare, employment, tax, privacy, healthcare information
technology, and data and intellectual property protection laws and regulations; laws regulating exports of technology products from the United States and foreign government restrictions on acquisitions of U.S.-origin products; fluctuations in
foreign currency exchange rates; difficulties in setting up foreign operations, including recruiting staff and management; and longer accounts receivable payment cycles and other collection difficulties. One or more of these risks may cause our
operating results and reputation to suffer.

Foreign sales subject us to numerous stringent U.S. and foreign laws, including the Foreign Corrupt
Practices Act, or FCPA, which prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. and other business entities for the purpose of obtaining or retaining business. As we expand our
international operations, there is some risk of unauthorized payments or offers of payments by one of our employees, consultants, sales agents or distributors, which could constitute a violation by Eclipsys of various laws including the FCPA, even
though such parties are not always subject to our control. Safeguards we implement to discourage these practices may prove to be less than effective and violations of the FCPA and other laws may result in severe criminal or civil sanctions, other
liabilities, including class action law suits and enforcement actions from the SEC, Department of Justice and overseas regulators, which could adversely affect our reputation, business, financial condition or results of operations.



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RISKS RELATED TO OUR OPERATING RESULTS, ACCOUNTING CONTROLS AND FINANCES

Our past stock option practices and related accounting issues have caused costly derivative litigation and may result in additional litigation, regulatory
proceedings and governmental enforcement actions.

As a result of the voluntary review of historical stock option practices we undertook from
February to May 2007, we concluded that incorrect measurement dates were used for accounting for certain prior stock option grants. As a result, we recorded additional non-cash stock-based compensation expense, and related tax effects, with regard
to certain past stock option grants, and we restated certain previously filed financial statements.

We believe these restatements reflect appropriate
judgments in determining the correct measurement dates for our stock option grants, and to date those judgments have not been challenged. However, as with other aspects of our financial statements, the results of our stock option review are subject
to regulatory review and there is a risk that we may have to further restate prior period results as a result of such a review.

In July and August of
2007, four purported stockholder derivative complaints were filed in the United States District Court for the Southern District of Florida against certain current and former directors and officers of Eclipsys and Eclipsys as a nominal defendant,
alleging that during the period from at least 1999 until 2006 certain of Eclipsys option grants were backdated and that as a result of this alleged backdating our financial statements were misstated, and stock sales by the named defendants
constituted improper insider selling. These complaints were consolidated in November 2007. These complaints sought monetary damages, disgorgement, repricing of certain stock options, governance reforms, and other relief. On March 20, 2008, the
parties to the derivative litigation entered into a memorandum of understanding setting forth the material terms of an agreement in principle to settle and resolve all claims. The settlement must be approved by the court following notice to
stockholders and if the settlement is not approved, we will continue to incur significant legal costs associated with the litigation. Dealing with this litigation has required us to incur substantial legal expenses, which affected our financial
results for 2007 and the first quarter of 2008. Derivative litigation also can result in management distraction and adverse publicity and resulting reputational harm, which could impair our sales and marketing efforts.

The option review and conclusions and related litigation may result in additional claims by stockholders or employees, regulatory proceedings, government enforcement
actions and related investigations and litigation. These risks include significant expenses, management distraction and potential damages, penalties, other remedies, or adverse findings, which could harm our business, financial condition, results of
operations and cash flows.

We have a history of operating losses and we cannot predict future profitability.

We experienced operating losses in the years ended December 31, 2003 through 2006. Although we reported operating income for the year ended December 31, 2007,
we may incur losses in the future, and it is not certain that we will sustain or increase our recent profitability.

Our operating results may
fluctuate significantly and may cause our stock price to decline.

We have experienced significant variations in revenues and operating results from
quarter to quarter. Our operating results may continue to fluctuate due to a number of factors, including:



| |  |  | the performance of our software and our ability to promptly and efficiently address software performance shortcomings or warranty issues;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the cost, timeliness and outcomes of our software development and implementation efforts, including expansion of our presence in India;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the timing, size and complexity of our software sales and implementations;
| | - |  | --------------------------------------------------------------------------



| |  |  | healthcare industry conditions and the overall demand for healthcare information technology;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | the financial condition of our clients and potential clients;
| | - |  | -------------------------------------------------------------



| |  |  | market acceptance of our new services, software and software enhancements by us or our competitors;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | client decisions regarding renewal or termination of their contracts;
| | - |  | ---------------------------------------------------------------------



| |  |  | software and price competition;
| | - |  | -------------------------------



| |  |  | personnel changes and other organizational changes and related expenses;
| | - |  | ------------------------------------------------------------------------



| |  |  | significant judgments and estimates made by management in the application of generally accepted accounting principles;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



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| |  |  | healthcare reform measures and healthcare regulation in general; and
| | - |  | --------------------------------------------------------------------



| |  |  | fluctuations in general economic and financial market conditions; including interest rates.
| | - |  | -------------------------------------------------------------------------------------------

It is difficult to predict the timing of revenues that we receive from software sales, because the sales cycle can vary depending upon several factors. These include the
size and terms of the transaction, the changing business plans of the client, the effectiveness of the clients management, general economic conditions and the regulatory environment. In addition, the timing of our revenue recognition could
vary considerably depending upon whether our clients license our software under our subscription model or our traditional licensing arrangements. Because a significant percentage of our expenses are relatively fixed, a variation in the timing of
sales and implementations could cause significant variations in operating results from quarter to quarter. We believe that period-to-period comparisons of our historical results of operations are not necessarily meaningful. Investors should not rely
on these comparisons as indicators of future performance.

Early termination of client contracts or contract penalties could adversely affect results
of operations.

Client contracts can change or terminate early for a variety of reasons. Change of control, financial issues, or other changes
in client circumstances may cause us or the client to seek to modify or terminate a contract. Further, either we or the client may generally terminate a contract for material uncured breach by the other. If we breach a contract or fail to
perform in accordance with contractual service levels, we may be required to refund money previously paid to us by the client, or to pay penalties or other damages. Even if we have not breached, we may deal with various situations from time to
time for the reasons described above which may result in the amendment or termination of a contract. These steps can result in significant current period charges and/or reductions in current or future revenue.

Because in many cases we recognize revenues for our software monthly over the term of a client contract, downturns or upturns in sales will not be fully reflected
in our operating results until future periods.

We recognize a significant portion of our revenues from clients monthly over the terms of their
agreements, which are typically 5-7 years and can be up to 10 years. As a result, much of the revenue that we report each quarter is attributable to agreements executed during prior quarters. Consequently, a decline in sales, client
renewals, or market acceptance of our software in one quarter will not necessarily be reflected in lower revenues in that quarter, and may negatively affect our revenues and profitability in future quarters. In addition, we may be unable to adjust
our cost structure to compensate for these reduced revenues. This monthly revenue recognition also makes it difficult for us to rapidly increase our revenues through additional sales in any period, as a significant portion of revenues from new
clients may be recognized over the applicable agreement term.

Loss of revenue from large clients could have significant negative impact on our
results of operations and overall financial condition.

During the fiscal year ended December 31, 2007, approximately 40% of our revenues were
attributable to our 20 largest clients. In addition, approximately 38% of our accounts receivable as of December 31, 2007 were attributable to 20 clients. One client represents 10% of our revenues. Loss of revenue from significant clients
or failure to collect accounts receivable, whether as a result of client payment default, contract termination, or other factors could have a significant negative impact on our results of operation and overall financial condition.

Impairment of intangible assets could increase our expenses.

A significant portion of our assets consists of intangible assets, including capitalized development costs, goodwill and other intangibles acquired in connection with acquisitions. Current accounting standards require us to evaluate
goodwill on an annual basis and other intangibles if certain triggering events occur, and adjust the carrying value of these assets to net realizable value when such testing reveals impairment of the assets. Various factors, including
regulatory or competitive changes, could affect the value of our intangible assets. If we are required to write-down the value of our intangible assets due to impairment, our reported expenses will increase, resulting in a corresponding
decrease in our reported profit.

Failure to maintain effective internal controls could adversely affect our operating results and the market price
of our common stock.

Section 404 of the Sarbanes-Oxley Act of 2002 requires that we maintain internal control over financial reporting that
meets applicable standards. If we are unable, or are perceived as unable, to produce reliable financial reports due to internal control deficiencies, investors could lose confidence in our reported financial information and our operating
results which could result in a negative market reaction.



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Funds associated with certain of our investments in auction rate securities may not be liquid or accessible for in
excess of 12 months, and our auction rate securities may experience further temporary or other-than-temporary decline in value, which would adversely affect our financial condition, cash flow and reported earnings.

A substantial portion of our short-term investment portfolio is invested in auction rate securities, or ARS. Beginning in February 2008, negative conditions in the credit
and capital markets resulted in failed auctions of our ARS because the amount of securities submitted for sale exceeded the amount of related purchase orders. Our ARS continued to fail to settle at auctions through the date of this report.
Accordingly, as of March 31, 2008 we recorded a temporary loss on these securities of $4.9 million in accumulated other comprehensive income, reflecting a decline in the estimated fair value of these securities. See Note F 
Marketable Securities for further information. If uncertainties in the credit and capital markets continue, these markets deteriorate further or we experience any rating downgrades on any investments in our portfolio (including on ARS), funds
associated with these securities may not be liquid or available to fund current operations for in excess of 12 months, causing us to classify our ARS as noncurrent assets and/or incur further temporary or other-than-temporary impairments in the
carrying value of our investments, which could negatively affect our financial condition, cash flow and reported earnings.

Inability to obtain other
financing could limit our ability to conduct necessary development activities and make strategic investments.

While our
available cash and cash equivalents and the cash we anticipate generating from operations appear at this time to be adequate to meet our foreseeable needs, we could incur significant expenses as a result of unanticipated events in our business or
competitive, regulatory, or other changes in our market. As a result, we may in the future need to obtain other financing. If other financing is not available on acceptable terms, we may not be able to respond adequately to these changes, which
could adversely affect our operating results and the market price of our common stock.

Our commercial credit facility subjects us to operating
restrictions and risks of default.

On May 9, 2008, we entered into a credit agreement with Wachovia Bank, pursuant to which the Company received a
senior secured revolving credit facility in the aggregate principal amount of $50.0 million. We entered into this arrangement to obtain funds to repay the $45.0 million short-term financing agreement entered into in February 2008. This credit
agreement is subject to certain financial ratio and collateral covenants. These covenants could restrict our ability to conduct business as we might otherwise deem to be in the Companys best interests, and breach of these covenants could cause
the debt to become immediately due and expose us to contractual penalties or damages and liquidation of collateral assets at unfavorable prices.

RISKS
OF LIABILITY TO THIRD PARTIES

Our software and content are used to assist clinical decision-making and provide information about patient medical
histories and treatment plans. If our software fails to provide accurate and timely information or is associated with faulty clinical decisions or treatment, clients, clinicians or their patients could assert claims against us that could result in
substantial cost to us, harm our reputation in the industry and cause demand for our software to decline.

We provide software and content that
provides practice guidelines and potential treatment methodologies, and other information and tools for use in clinical decision-making, provides access to patient medical histories and assists in creating patient treatment plans. If our
software fails to provide accurate and timely information, or if our content or any other element of our software is associated with faulty clinical decisions or treatment, we could have liability to clients, clinicians or patients. The assertion of
such claims, whether or not valid, and ensuing litigation, regardless of its outcome, could result in substantial cost to us, divert managements attention from operations and decrease market acceptance of our software. We attempt to limit by
contract our liability for damages and to require that our clients assume responsibility for medical care and approve all system rules and protocols. Despite these precautions, the allocations of responsibility and limitations of liability set forth
in our contracts may not be enforceable, may not be binding upon patients, or may not otherwise protect us from liability for damages. We maintain general liability and errors and omissions insurance coverage, but this coverage may not continue to
be available on acceptable terms or may not be available in sufficient amounts to cover one or more large claims against us. In addition, the insurer might disclaim coverage as to any future claim. One or more large claims could exceed our available
insurance coverage.



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Complex software such as ours may contain errors or failures that are not detected until after the software is introduced
or updates and new versions are released. It is challenging for us to envision and test our software for all potential problems because it is difficult to simulate the wide variety of computing environments, medical circumstances or treatment
methodologies that our clients may deploy or rely upon. Despite extensive testing by us and clients, from time to time we have discovered defects or errors in our software, and such defects or errors can be expected to appear in the future. Defects
and errors that are not timely detected and remedied could expose us to risk of liability to clients, clinicians and patients and cause delays in software introductions and shipments, result in increased costs and diversion of development resources,
require design modifications or decrease market acceptance or client satisfaction with our software.

Our software and our vendors software
that we include in our offering could infringe third-party intellectual property rights, exposing us to costs that could be significant.

Infringement or invalidity claims or claims for indemnification resulting from infringement claims could be asserted or prosecuted against us based upon design or use of software we provide to clients, including software we develop as well
as software provided to us by vendors. Regardless of the validity of any claims, defending against these claims could result in significant costs and diversion of our resources, and vendor indemnity might not be available. The assertion of
infringement claims could result in injunctions preventing us from distributing our software, or require us to obtain a license to the disputed intellectual property rights, which might not be available on reasonable terms or at all. We might also
be required to indemnify our clients at significant expense.

RISKS RELATED TO OUR STRATEGIC RELATIONSHIPS AND INITIATIVES

We depend on licenses from third parties for rights to some of the technology we use, and if we are unable to continue these relationships and maintain our rights
to this technology, our business could suffer.

We depend upon licenses for some of the technology used in our software from a number of third-party
vendors. Most of these licenses expire within one to five years, can be renewed only by mutual consent and may be terminated if we breach the terms of the license and fail to cure the breach within a specified period of time. We may not be able to
continue using the technology made available to us under these licenses on commercially reasonable terms or at all. As a result, we may have to discontinue, delay or reduce software sales until we obtain equivalent technology, which could hurt our
business. Most of our third-party licenses are non-exclusive. Our competitors may obtain the right to use any of the technology covered by these licenses and use the technology to compete directly with us. In addition, if our vendors choose to
discontinue support of the licensed technology in the future or are unsuccessful in their continued research and development efforts, particularly with regard to Microsoft, we may not be able to modify or adapt our own software.

Our software offering often includes modules provided by third parties, and if these third parties do not meet their commitments, our relationships with our
clients could be impaired.

Some of the software modules we offer to clients are provided by third parties. We often rely upon these third
parties to produce software that meets our clients needs and to implement and maintain that software. If these third parties fail to fulfill their responsibilities, our relationships with affected clients could be impaired, and we could
be responsible to clients for the failures. We might not be able to recover from these third parties for all of the costs we incur as a result of their failures.

If we undertake additional acquisitions, they may be disruptive to our business and could have an adverse effect on our future operations and the market price of our common stock.

An important element of our business strategy has been expansion through acquisitions and while there is no assurance that we will complete any future acquisitions, any
acquisitions would involve a number of risks, including the following:



| |  |  | The anticipated benefits from the acquisition may not be achieved. The integration of acquired businesses requires substantial attention from management. The
diversion of managements attention and any difficulties encountered in the transition process could hurt our business.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In future acquisitions, we could issue additional shares of our common stock, incur additional indebtedness or pay consideration in excess of book value, which
could dilute future earnings. We also have exposure given the risk of assumed liabilities.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | New business acquisitions generate significant intangible assets that result in substantial related amortization charges to us and possible impairments.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



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RISKS RELATED TO INDUSTRY REGULATION

Potential regulation by the U.S. Food and Drug Administration of our software and content as medical devices could impose increased costs, delay the introduction of new software and hurt our business.

The U.S. Food and Drug Administration, or FDA, may become increasingly active in regulating computer software or content intended for use in the healthcare
setting. The FDA has increasingly focused on the regulation of computer software and computer-assisted products as medical devices under the Food, Drug, and Cosmetic Act, or the FDC Act. If the FDA chooses to regulate any of our software, or third
party software that we resell, as medical devices, it could impose extensive requirements upon us, including the following requiring us to:



| |  |  | seek FDA clearance of pre-market notification submission demonstrating substantial equivalence to a device already legally marketed, or to obtain FDA approval of a
pre-market approval application establishing the safety and effectiveness of the software;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | comply with rigorous regulations governing the pre-clinical and clinical testing, manufacture, distribution, labeling and promotion of medical devices; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | comply with the FDC Act regarding general controls including establishment registration, device listing, compliance with good manufacturing practices, reporting of
specified device malfunctions and adverse device events.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

If we fail to comply with applicable requirements, the FDA could respond by
imposing fines, injunctions or civil penalties, requiring recalls or software corrections, suspending production, refusing to grant pre-market clearance or approval of software, withdrawing clearances and approvals, and initiating criminal
prosecution. Any FDA policy governing computer products or content may increase the cost and time to market of new or existing software or may prevent us from marketing our software.

Changes in federal and state regulations relating to patient data could depress the demand for our software and impose significant software redesign costs on us.

Clients use our systems to store and transmit highly confidential patient health information and data. State and federal laws and regulations and their foreign
equivalents govern the collection, security, use, transmission and other disclosures of health information. These laws and regulations may change rapidly and may be unclear or difficult to apply.

Federal regulations under the Health Insurance Portability and Accountability Act of 1996, or HIPAA, impose national health data standards on healthcare providers that
conduct electronic health transactions, healthcare clearinghouses that convert health data between HIPAA-compliant and non-compliant formats and health plans. Collectively, these groups are known as covered entities. The HIPAA standards prescribe
transaction formats and code sets for electronic health transactions; protect individual privacy by limiting the uses and disclosures of individually identifiable health information; and require covered entities to implement administrative, physical
and technological safeguards to ensure the confidentiality, integrity, availability and security of individually identifiable health information in electronic form. Though we are not a covered entity, most of our clients are and require that our
software and services adhere to HIPAA standards. Any failure or perception of failure of our software or services to meet HIPAA standards could adversely affect demand for our software and services and force us to expend significant capital,
research and development and other resources to modify our software or services to address the privacy and security requirements of our clients.

States
and foreign jurisdictions in which we or our clients operate have adopted, or may adopt, privacy standards that are similar to or more stringent than the federal HIPAA privacy standards. This may lead to different restrictions for handling
individually identifiable health information. As a result, our clients may demand information technology solutions and services that are adaptable to reflect different and changing regulatory requirements which could increase our development costs.
In the future, federal, state or foreign governmental or regulatory authorities or industry bodies may impose new data security standards or additional restrictions on the collection, use, transmission and other disclosures of health information. We
cannot predict the potential impact that these future rules may have on our business. However, the demand for our software and services may decrease if we are not able to develop and offer software and services that can address the regulatory
challenges and compliance obligations facing our clients.

RISKS RELATED TO OUR PERSONNEL AND ORGANIZATION

Our growing operations in India expose us to risks that could have an adverse effect on our results of operations.

We now have a significant workforce employed in India engaged in a broad range of development, support and corporate infrastructure activities that are integral to our
business and critical to our profitability. This involves significant challenges that are increased by our lack of prior experience managing operations in India. Further, while there are certain cost advantages to operating in India, significant
growth in the technology sector in India has increased competition to attract and retain skilled employees with commensurate increases in compensation costs. We may not be able to hire and retain such personnel at compensation levels consistent with
our existing compensation and salary structure. Many of the companies with which we compete for hiring experienced



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employees have greater resources than we have and may be able to offer more attractive terms of employment. In addition, our operations in India require
ongoing capital investments and expose us to foreign currency fluctuations, which may significantly reduce or negate any cost benefit anticipated from such expansion. As a result of these and other factors there can be no assurance that we will
successfully integrate our India operations, or that our expansion in India will advance our business strategy and provide a satisfactory return on this investment.

In addition, our reliance on a workforce in India exposes us to disruptions in the business, political and economic environment in that region. Maintenance of a stable political environment is important to our
operations, and terrorist attacks and acts of violence or war may directly affect our physical facilities and workforce or contribute to general instability. Our operations in India may also be affected by trade restrictions, such as tariffs or
other trade controls, as well as other factors that may adversely affect our business and operating results.

If we fail to attract, motivate and
retain highly qualified technical, marketing, sales and management personnel, our ability to execute our business strategy could be impaired.

Our
success depends, in significant part, upon the continued services of our key technical, marketing, sales and management personnel, and on our ability to continue to attract, motivate and retain highly qualified employees. Competition for these
employees is intense and we maintain at-will employment terms with our employees. In addition, the process of recruiting personnel with the combination of skills and attributes required to execute our business strategy can be difficult,
time-consuming and expensive. We believe that our ability to implement our strategic goals depends to a considerable degree on our senior management team. The loss of any member of that team could hurt our business.

In October 2007 we announced plans to move our corporate headquarters to our existing office in Atlanta, Georgia from Boca Raton, Florida. Although the relocation
was substantially completed during the first quarter of 2008, we could experience difficulty in the completion of training and transitioning the new employees, which could affect our operations and financial performance until our newly hired Atlanta
headquarters staff is independently completing all responsibilities.

RISKS RELATED TO OUR EQUITY STRUCTURE

Provisions of our charter documents and Delaware law may inhibit potential acquisition bids that a stockholder may believe is desirable, and the market price of our
common stock may be lower as a result.

Our board of directors has the authority to issue up to 4,900,000 shares of preferred stock. The board of
directors can fix the price, rights, preferences, privileges and restrictions of the preferred stock without any further vote or action by our stockholders. The issuance of shares of preferred stock may discourage, delay or prevent a merger or
acquisition of our company. The issuance of preferred stock may result in the loss of voting control to other stockholders. We have no current plans to issue any shares of preferred stock and our stockholder rights agreement, or poison
pill, which uses preferred stock purchase rights to deter certain takeover efforts, has been terminated effective as of May 8, 2008. However, we could implement a new poison pill in the future, or make other uses of preferred stock to
inhibit potential acquisition of the company.

Our charter documents contain additional anti-takeover devices, including:



| |  |  | only one of the three classes of directors is elected each year;
| | - |  | ----------------------------------------------------------------



| |  |  | the ability of our stockholders to remove directors without cause is limited;
| | - |  | -----------------------------------------------------------------------------



| |  |  | the right of stockholders to act by written consent has been eliminated;
| | - |  | ------------------------------------------------------------------------



| |  |  | the right of stockholders to call a special meeting of stockholders has been eliminated; and
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | advance notice must be given to nominate directors or submit proposals for consideration at stockholders meetings.
| | - |  | ------------------------------------------------------------------------------------------------------------------



|ITEM 5. | OTHER INFORMATION
|------- | -----------------

On May 9, 2008, the Company filed with the
Delaware Secretary of State a Certificate of Elimination of the Series A Junior Participating Preferred Stock. This document modifies our Amended and Restated Certificate of Incorporation to eliminate the Certificate of Designation that was
previously filed to designate our Series A Preferred Stock. The Series A Preferred Stock was issuable upon exercise of the preferred stock purchase rights issued pursuant to the Companys Rights Agreement dated July 26, 2000 (the Rights
Agreement). The Rights Agreement terminated on May 8, 2008; consequently, the preferred stock purchase rights are no longer effective. No shares of Series A Preferred Stock were issued.



|ITEM 6. | EXHIBITS
|------- | --------

See Index to exhibits.



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SIGNATURES

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



|                                                 
|-------------------------------------------------
|Date: May 12, 2008                               
|                                                 
|/s/ Robert J. Colletti                           
|Robert J. Colletti                               
|Senior Vice President and Chief Financial Officer



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|               |  |                                                                                                                                                                |  |                           |  |         |  |                   
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- |  | ------- |  | ------------------
|               |  |                                                                                                                                                                |  | Incorporated by Reference
|Exhibit Number |  | Exhibit Description                                                                                                                                            |  | Form                      |  | Exhibit |  | Filing Date       
|2.1            |  | Stock Purchase Agreement, dated as of February 25, 2008, by and among the Registrant, Enterprise Performance Systems, Inc. (EPSi), and stockholders of EPSi. |  |                           |  |         |  | Filed herewith    
|               |  |                                                                                                                                                                |  |                          
|3.1            |  | Third Amended and Restated Certificate of Incorporation of the Registrant                                                                                      |  | 10-Q                      |  | 3.1     |  | September 21, 1998
|               |  |                                                                                                                                                                |  |                          
|3.2            |  | Amended and Restated Bylaws of the Registrant                                                                                                                  |  | 8-K                       |  | 3.2     |  | November 19, 2007 
|               |  |                                                                                                                                                                |  |                          
|4.1            |  | Specimen certificate for shares of Common Stock                                                                                                                |  | S-1                       |  | 4.1     |  | April 23, 1998    
|               |  |                                                                                                                                                                |  |                          
|10.1 *         |  | Amended and Restated 2005 Inducement Grant Stock Incentive Plan                                                                                                |  |                           |  |         |  | Filed herewith    
|               |  |                                                                                                                                                                |  |                          
|10.2 *         |  | February 7, 2008 Amendment No. 1 to Employment Agreement between the Registrant and R. Andrew Eckert dated as of October 24, 2005                              |  |                           |  |         |  | Filed herewith    
|               |  |                                                                                                                                                                |  |                          
|10.3 *         |  | February 7, 2008 Amendment No. 1 to Employment Agreement between the Registrant and John E. Deady dated December 22, 2005                                      |  |                           |  |         |  | Filed herewith    
|               |  |                                                                                                                                                                |  |                          
|31.1           |  | Certification of R. Andrew Eckert                                                                                                                              |  |                           |  |         |  | Filed herewith    
|               |  |                                                                                                                                                                |  |                          
|31.2           |  | Certification of Robert J. Colletti                                                                                                                            |  |                           |  |         |  | Filed herewith    
|               |  |                                                                                                                                                                |  |                          
|32.1           |  | Certification Pursuant to 18 U.S.C. Section 1350                                                                                                               |  |                           |  |         |  | Filed herewith    
|               |  |                                                                                                                                                                |  |                          
|32.2           |  | Certification Pursuant to 18 U.S.C. Section 1350                                                                                                               |  |                           |  |         |  | Filed herewith    



|* | Indicates a management contract or compensatory arrangement
|- | -----------------------------------------------------------



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