<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549

                                   FORM 10-Q

                  QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

                  FOR QUARTER ENDED MARCH 31, 1998 COMMISSION
                              FILE NUMBER 1-7516

                                 KEANE, INC.
            (Exact name of registrant as specified in its charter)

     MASSACHUSETTS                              04-2437166
     (State or other jurisdictions of           (I.R.S. Employer Identification
     incorporation or organization)             Number)
                                             
     Ten City Square, Boston, Massachusetts     02129
     (Address of principal executive offices)   (Zip Code)
 
     Registrant's telephone number, including area code     (617) 241-9200

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
 
Yes   X       No      
    -----        -----

As of March 31, 1998, the number of issued and outstanding shares of Common
Stock (excluding 305,615 shares held in treasury) and Class B Common stock are
66,539,845 and 286,378 shares, respectively.  The Company distributed a two for
one stock split on August 29, 1997, in the form of a stock dividend to
shareholders of record as of August 14, 1997, which has been reflected in the
number of Common Shares outstanding.

                                  Page 1 of 13
<PAGE>
 
Keane, Inc. and Subsidiaries

TABLE OF CONTENTS


<TABLE>
<CAPTION> 

Part I - Financial Information

<S>                                                                                      <C>
Consolidated Statements of Income for the three months ended March 31, 1998
and 1997...............................................................................   3
 
Consolidated Balance Sheets as of March 31, 1998 and December 31, 1997.................   4
 
Consolidated Statements of Cash Flows for the three months ended March 31, 1998
and 1997...............................................................................   5
 
Notes to Financial Statements..........................................................   6
 
Management's Discussion and Analysis of Financial Condition and Results of Operations..   8
 
Part II - Other Information............................................................  12
 
Signature Page.........................................................................  13
</TABLE>

                                  Page 2 of 13
<PAGE>
 
KEANE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                               (In thousands except per share amounts)
                                                                          Three months ended March 31,
                                                                        1998                      1997
<S>                                                           <C>                        <C>
Total revenues                                                     $209,162                   $141,110
                                                                                         
Salaries, wages and other direct costs                              137,422                     93,508
Selling, general and administrative expenses                         37,598                     27,548
Amortization of goodwill and other intangible assets                  1,644                      3,509
                                                                   --------                   --------
                                                                                         
     Operating income                                                32,498                     16,545
                                                                                         
Investment income                                                     1,155                        923
Interest expense                                                         49                         50
Other expenses, net                                                     131                        142
                                                                   --------                   --------
                                                                                         
     Income before income taxes                                      33,473                     17,276
                                                                                         
Provision for income taxes                                           14,393                      7,428
                                                                   --------                   --------
                                                                                         
     Net income                                                      19,080                     $9,848
                                                                   ========                   ========
                                                                                         
*Net income per share (basic)                                          $.29                       $.15
                                                                   ========                   ========
*Net income per share (diluted)                                        $.28                       $.15
                                                                   ========                   ========
                                                                                         
*Weighted average common  shares outstanding (basic)                 66,525                     65,787
                                                                   ========                   ========
*Weighted average common and common share equivalents                
 outstanding (diluted)                                               67,976                     67,148
                                                                   ========                   ======== 

</TABLE> 

*Adjusted to reflect the Company's two for one stock split in the form of a
 dividend distributed on August 29, 1997 to shareholders of record as of August
 14, 1997
 
 
 
                  The accompanying notes are an integral part
                   of the consolidated financial statements.

                                  Page 3 of 13
<PAGE>
 
<TABLE>
<CAPTION>
KEANE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
                                                                               (IN THOUSANDS)
                                                                MARCH 31, 1998             DECEMBER 31, 1997
<S>                                                        <C>                        <C>
Assets
Current:
     Cash and cash equivalents                                        $ 14,421                      $ 33,644
     Short term investments                                              5,965                         6,607
     Accounts receivable, net:                                  
       Trade                                                           191,079                       147,668
       Other                                                             1,368                         1,588
     Prepaid expenses and other current assets                          10,996                        10,597
                                                                      --------                      --------
          Total current assets                                         223,829                       200,104
                                                                
Long term investments                                                   49,560                        44,139
Property and equipment, net                                             20,845                        20,546
Intangible assets, net                                                  31,134                        32,778
Other assets, net                                                        9,259                         8,743
                                                                      --------                      --------
                                                                      $334,627                      $306,310
                                                                      ========                      ========
Liabilities                                                     
Current:                                                        
     Accounts payable                                                 $ 13,528                      $ 17,892
     Accrued expenses and other liabilities                             19,319                        12,833
     Accrued compensation                                               16,247                        22,786
     Notes payable                                                         154                         3,004
     Accrued income taxes                                               15,310                         2,055
     Current capital lease obligations                                     239                           211
                                                                      --------                      --------
          Total current liabilities                                     64,797                        58,781
                                                                
Capital lease obligations                                                   74                           188
                                                                
Stockholders' Equity                                            
Common stock                                                             6,690                         6,627
Class B common stock                                                        29                            29
Additional paid-in capital                                             100,090                        97,680
Foreign currency translation                                              (165)                         (372)
Retained earnings                                                      165,525                       145,790
Less treasury stock                                                     (2,413)                       (2,413)
                                                                      --------                      --------
          Total stockholders' equity                                   269,756                       247,341
                                                                      --------                      --------
                                                                      $334,627                      $306,310
                                                                      ========                      ========
</TABLE>
                  The accompanying notes are an integral part
                   of the consolidated financial statements.

                                  Page 4 of 13
<PAGE>
 
KEANE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS



<TABLE>
<CAPTION>
                                                                                     (IN THOUSANDS)
                                                                               THREE MONTHS ENDED MARCH 31,
Cash flows from Operating Activities:                                           1998                  1997
<S>                                                                           <C>                   <C>
Net Income                                                                    $ 19,080              $  9,848
Adjustments to reconcile net income to net cash used for
 operating activities:
     Depreciation and amortization                                               4,252                 5,028
     Deferred income taxes                                                      (1,706)                 (192)
     Provision for doubtful accounts                                             1,632                   691
     Loss (gain) on the sale of property and equipment                                                   (37)
     Non-cash interest on long-term debt                                                                  49
Changes in assets and liabilities, net of acquisitions:
     (Increase) in accounts receivable                                         (44,016)              (22,377)
      Decrease  in prepaid expenses and other assets                               792                 1,737
     (Decrease) in accounts payable and accrued expenses and                    (4,404)               (6,193)
      other liabilities
     Increase in income taxes payable                                           13,312                 3,994
                                                                              --------              --------
 
     NET CASH USED FOR OPERATING ACTIVITIES                                    (11,058)               (7,452)
                                                                              --------              --------
 
CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of investments                                                   (17,653)              (12,547)
     Sale of investments                                                        12,874                 2,602
     Purchase of property and equipment                                         (2,631)               (1,500)
     Proceeds from the sale of property and equipment                                5                     1
     Proceeds from sale of business units                                                                400
     Payments for current acquisitions                                            (295)                 ----
                                                                              --------              --------
 
     NET CASH USED FOR INVESTING ACTIVITIES                                     (7,700)              (11,044)
                                                                              --------              --------
 
CASH FLOWS FROM FINANCING ACTIVITIES:
     Payments under long-term debt                                              (2,850)               (3,100)
     Principal payments under capital lease obligations                            (87)                  (81)
     Proceeds from issuance of common stock                                      2,472                   807
                                                                              --------              --------
 
     NET CASH USED FOR FINANCING ACTIVITIES                                       (465)               (2,374)
                                                                              --------              --------
 
     Net (decrease) in cash and cash equivalents                               (19,223)              (20,870)
     Cash and cash equivalents at beginning of period                           33,644                38,837
                                                                              --------              --------
     Cash and cash equivalents at end of period                               $ 14,421              $ 17,967
                                                                              ========              ========
 
</TABLE>
 
                  The accompanying notes are an integral part
                   of the consolidated financial statements.

                                  Page 5 of 13
<PAGE>
 
KEANE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 1.   The accompanying unaudited consolidated financial statements have
          been prepared in accordance with the accounting policies described in
          the Company's Annual Report on Form 10-K for the year ended December
          31, 1997 (the "Annual Report") and should be read in conjunction with
          the disclosures therein.  All financial figures are in thousands of
          dollars, except per share amounts. Prior period amounts have been
          restated to conform to current year presentation.

          In the opinion of management, these interim financial statements
          reflect all adjustments, consisting of normal recurring accruals,
          necessary to present fairly the financial position, results of
          operations and cash flows for the periods presented. Interim results
          are not necessarily indicative of results for the full year.

          On July 24, 1997, the Company declared a two for one stock split in
          the form of a dividend distributed on August 29, 1997 to shareholders
          of record as of August 14, 1997. All Common shares and per share
          amounts included in these financial statements are given retroactive
          effect to the extent required for this stock split.

Note 2.   Computation of Earnings Per Share for quarters ending March 31, 1998
          and 1997.

<TABLE>
<CAPTION>
                                                        1998            1997 
<S>                                                 <C>             <C>     
     Net income                                       $19,080         $ 9,848
                                                                             
     Weighted average number of common                 66,525          65,787
     shares outstanding used in calculation                                  
     of basic earnings per share                                             
                                                                             
     Incremental shares from the assumed                1,451           1,361
     exercise of dilutive stock options                                     
                                                                             
     Weighted average number of common                 67,976          67,148
     shares outstanding used in calculation                                
     of diluted earnings per share                                         
                                                                             
     Earnings per share                                                      
                                                                             
        Basic                                         $   .29         $   .15
                                                      =======         =======
                                                                             
        Diluted                                       $   .28         $   .15
                                                      =======         ======= 
</TABLE>
                                                                                

                                  Page 6 of 13
<PAGE>
 
KEANE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED FINANCIAL STATEMENTS

<TABLE>
<CAPTION> 
Note 3.  Intangible assets consist of the following:                                3/31/98        12/31/97
<S>                                                                                 <C>            <C>
                       Goodwill                                                      $20,360         $20,360
                       Noncompetition agreements                                       1,268          22,203
                       Customer-based intangibles                                     37,745          37,915
                       Software                                                        5,618           8,089
                       Other                                                             273           1,208
                                                                                    --------       ---------
                                                                                      65,264          89,775
                       Less accumulated amortization                                  34,130          56,997
                                                                                    --------       ---------
 
                                                                                     $31,134         $32,778
                                                                                    ========       =========
</TABLE>
                                                                                

                                  Page 7 of 13
<PAGE>
 
KEANE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

This Quarterly Report on Form 10-Q contains forward-looking statements.  For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements.  Without
limiting the foregoing, the words "believes," "anticipates," "plans," "expects,"
and similar expressions are intended to identify forward-looking statements.
There are a number of important factors that could cause the Company's actual
results to differ materially from those indicated by such forward-looking
statements.  These factors include, without limitation, those set forth below
under the caption "Certain Factors That May Affect Future Results."

Results of Operations
---------------------

The Company's revenue for the First Quarter of 1998 was $209.2 million, a 48%
increase from $141.1 million in the First Quarter of 1997. The increase in
revenue resulted primarily from strong growth in year 2000 compliance and
application outsourcing services, in addition to increases in helpdesk and IT
consulting services. Year 2000 revenue increased 288% to $71.1 million and
application outsourcing revenue increased 90% to $33.2 million. Helpdesk revenue
increased 63% to $11.8 million and IT consulting services revenue increased 63%
to $5.8 million. Revenue from supplemental staffing decreased 14% to $59.1
million for the first quarter. The decrease resulted from the Company's decision
to de-emphasize supplemental staff in favor of strategic services which produce
higher margins. Revenue from the Company's Healthcare Services Division
increased by 30% to $9.0 million. All other services revenue totaled $19.2
million, about the same as last year.

Salaries, wages and other direct costs for the First Quarter of 1998 were $137.4
million, or 65.7% of revenue, compared to $93.5 million, or 66.3% of revenue,
for the First Quarter of 1997, for a 0.6% decrease as a percentage of revenue.
This decrease as a percentage of revenue is primarily attributable to an
increase in higher margin strategic services business.  This business comprised
approximately 66.4% of the Company's revenue in the First Quarter of 1998
compared to approximately 45.0% for the First Quarter last year.

Selling, General & Administrative ("SG&A") expenses for the First Quarter of
1998 were $37.6 million, or 18.0% of revenue, compared to $27.5 million, or
19.5% of revenue, for the First Quarter last year.  The decrease in SG&A as a
percentage of revenue was primarily attributable to the economies of scale
associated with increased revenue that did not require a proportionate increase
in SG&A and to a large extent to an increase in the number of large contracts in
which the Company is engaged, which allows associated overhead services to be
delivered more cost effectively.

Amortization of goodwill and other intangible assets for the First Quarter of
1998 was $1.6 million, or 0.8% of revenue, compared to $3.5 million, or 2.5% of
revenue in the First Quarter of 1997. The decrease in amortization is primarily
attributable to certain intangible assets being fully amortized at year end
1997.

Interest and other related investment income totaled $1.2 million for the First
Quarter of 1998, compared to $0.9 million for the same period last year.
Interest and other related expenses for the First Quarter of each of 1998 and
1997 totaled $0.2 million.

Pre-tax income for the First Quarter of 1998 was $33.5 million, or 16.0% of
revenue, up 93.8% from pre-tax income of $17.3 million, or 12.2% of revenue, in
the First Quarter of 1997.

The Company's effective tax rate for the First Quarter of each of 1998 and 1997
was 43.0%.

                                  Page 8 of 13
<PAGE>
 
Net income and earnings per share basic and diluted for the First Quarter of
1998 were $19.1 million, $0.29 and $0.28, respectively, compared to $9.8
million, $0.15 and $0.15 respectively for the First Quarter last year.


LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

The Company ended the First Quarter of 1998 with cash and investments totaling
approximately $69.9 million, down from the year end balance of $84.4 million.
The decrease is primarily attributable to the increase in accounts receivable,
due to the Company's revenue growth. The Company maintains and has available a
$20 million unsecured demand line of credit split equally between two major
Boston banks.

Based on the Company's current operating plan, it believes that its cash and
cash equivalents on hand, cash flows from operations, and its current available
lines of credit will be sufficient to meet its current working capital
requirements during at least the next twelve months.

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS:  The following important
factors, among others, could cause actual results to differ materially from
those indicated by forward-looking statements made in this Quarterly Report on
Form 10-Q and presented elsewhere by management from time to time.

The Company has experienced and expects to continue to experience fluctuations
in its quarterly results. Gross margins vary based on a variety of factors
including employee utilization rates and the number and type of services
performed by the Company during a particular period. A variety of factors
influence the level of the Company's revenues in a particular quarter, including
general economic conditions which may influence its clients and potential
clients to invest in their information systems or to downsize their businesses,
the number and requirements of client engagements, employee utilization rates,
changes in the rates the Company is able to charge its clients for its services,
acquisitions by the Company and other factors, many of which are beyond the
Company's control.  Since a significant portion of the expenses of the Company
do not vary relative to the Company's level of revenues, if revenues in a
particular quarter do not meet expectations, operating results will be adversely
affected, which may have an adverse impact on the market price of the Company's
Common Stock.  In addition, many of the Company's engagements are terminable
without client penalty.  An unanticipated termination of a major project could
result in an increase in underutilized employees and a decrease in revenues and
profits.

In the past five years, the Company has grown significantly through
acquisitions, and the Company's future growth may be based in part on selected
acquisitions.  The Company's ability to expand successfully by acquisitions
depends on many factors, including the successful identification and acquisition
of businesses and management's ability to integrate and operate the new
businesses effectively. The Company competes for acquisition candidates with
other entities, some of whom have greater financial resources than the Company.
Increased competition for acquisition candidates may result in fewer acquisition
opportunities being made available to the Company as well as less advantageous
acquisition terms, including increased purchase prices. The anticipated benefits
from any acquisition, including the Company's recent acquisition of Omega
Systems in Pittsburgh, Pennsylvania and the business of GSE Erudite Systems in
Salt Lake City, Utah, may not be achieved unless the operations of the acquired
business are successfully combined with those of the Company in a timely manner.
The integration of the Company's acquisitions requires substantial attention
from management.  The diversion of the attention of management, and any
difficulties encountered in the transition process, could have an adverse impact
on Keane's revenues and operating results.  In addition, the process of
integrating the various businesses could cause the interruption of, or a loss of
momentum in, the activities of some or all

                                  Page 9 of 13
<PAGE>
 
of these businesses, which could have an adverse effect on the Company's
operations and financial results.

The Company believes that its future success will depend in large part on its
ability to continue to attract and retain highly-skilled technical and
management personnel. The competition for such personnel is intense. There can
be no assurance that the Company will continue to attract and retain personnel
necessary for the development of its business.

The custom software services market is highly competitive and characterized by
continual change and improvement in technology.  The market is fragmented, and
no company holds a dominant position.  Consequently, Keane's competition for
client assignments and experienced personnel varies significantly from city to
city and by the type of service provided. Some of Keane's competitors are large
and have greater technical, financial and marketing resources and greater name
recognition in the markets they serve than does the Company.  In addition,
clients may elect to increase their internal information systems resources to
satisfy their custom software development needs.  The Company believes that the
bases for competition in the software services industry include the ability to
compete cost-effectively, develop strong client relationships, generate
recurring revenues, utilize comprehensive delivery methodologies and achieve
organizational learning by implementing standard operational processes.  In the
healthcare software systems market, Keane competes with some companies that are
larger in the healthcare market and have greater financial resources than Keane.
The Company believes that significant competitive factors in the healthcare
software systems market include size and demonstrated ability to provide service
to targeted healthcare markets.  There can be no assurance that the Company will
continue to compete successfully with its existing competitors or will be able
to compete successfully with any new competitors.

In recent years, the stock market in general and the market for technology
stocks, in particular, including the Company's Common Stock, have experienced
extreme price fluctuations. There is a risk that stock price fluctuation could
impact the Company's operations. Changes in the price of the Company's Common
Stock could affect the Company's ability to successfully attract and retain
qualified personnel or complete necessary business combinations or other
transactions in the future.

The Company has assessed its internal computer systems and has identified
certain internal systems that are not year 2000 compatible (i.e., such systems
use only two digits to represent the year in date data fields and, consequently,
may not accurately distinguish between the 20th century and 21st centuries or
may not function properly at the turn of the century). The Company is in the
process of correcting such systems or replacing them with year 2000 compliant
systems. The Company expects to implement successfully the systems and
programming changes necessary to address year 2000 issues and does not believe
that the cost of such actions will have a material effect on the Company's
results of operations or financial condition. There can be no assurance,
however, that there will not be a delay in, or increased costs associated with,
the implementation of such changes, and the Company's inability to implement
such changes could have an adverse effect on the Company's business, operations
and financial results.

Among the services that the Company provides are assessment, planning,
migration/remediation and testing services for year 2000 compliance. The Company
has devoted significant resources to services that address the year 2000 problem
and believes the market for these services will grow as the year 2000
approaches. However, there can be no assurance that the market for year 2000
services will continue to develop and if such market fails to grow, or grows
more slowly than anticipated, it could have an adverse effect on the Company's
business, operations and financial results. Although the Company believes that
the demand for its services relating to the year 2000 problem will continue to
exist after the year 2000, this demand will diminish significantly over time and
will eventually disappear. The Company's services addressing the year 2000
problem involve key aspects of its clients' computer systems. A failure in a
client's system could result in a claim for substantial damages against the
Company, regardless of the

                                 Page 10 of 13
<PAGE>
 
Company's responsibility for such failure. Litigation, regardless of its
outcome, could result in substantial cost to the Company. Accordingly, any
contract liability claim or litigation against the Company could have an adverse
effect on the Company's business, operations and financial results.

As a result of these and other factors, the Company's past financial performance
should not be relied on as an indication of future performance. Keane believes
that period to period comparisons of its financial results are not necessarily
meaningful and it expects that results of operations may fluctuate from period
to period in the future.

                                 Page 11 of 13
<PAGE>
 
KEANE, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
--------------------------------------------------------------------------------


Item 2. Changes in Securities and Use of Proceeds.

        On January 30, 1998, the Company acquired Quantum Associates, Inc.,
        d/b/a Omega Systems ("Omega") pursuant to an Agreement and Plan of
        Merger among the Company, Alpha Acquisition Corp. and Omega (the "Merger
        Agreement"). Under the Merger Agreement, the Company issued to former
        Omega shareholders shares of Common Stock of the Company having an
        aggregate value of $7,054,000. These shares were issued in reliance on
        Section 4(2) of the Securities Act of 1933, as amended, as a sale by the
        Company not involving a public offering. No underwriters were involved
        with such issuance of Common Stock.

Item 5. Other Information.

        The Company has signed a definitive agreement on April 20, 1998 to 
        acquire Chicago-based Bricker & Associates, Inc. ("Bricker"), a
        privately-held operations improvement consulting firm. The transaction
        will be accounted for as a pooling of interests and is expected to close
        by early June, subject to receipt of regulatory approvals and
        satisfaction of other closing conditions. It is anticipated that the
        purchase of Bricker will be immediately accretive to the Company's
        earnings.

Item 6. Exhibits and Reports on Form 8-K.

        (a) Exhibits - None

        (b) Reports on Form 8-K - The registrant filed no reports on Form 8-K
            during the quarter ended March 31, 1998.
 


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

                                 Page 12 of 13
<PAGE>
 
                                   Signatures
--------------------------------------------------------------------------------

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


Date     May 12, 1998                    /s/ John F. Keane
     -----------------------             ----------------------------------
                                         John F. Keane
                                         President
                                         
                                         
Date     May 12, 1998                    /s/ Wallace A. Cataldo
     -----------------------             ----------------------------------
                                         Wallace A. Cataldo
                                         Vice President, Finance
                                         (Principal Financial and Accounting
                                         Officer)

                                 Page 13 of 13