================================================================================


                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

                                    FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

    FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998 OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

FOR THE TRANSITION PERIOD FROM        TO

COMMISSION FILE NUMBER: 000-24409

                     INTERNATIONAL INTEGRATION INCORPORATED

             (Exact Name of Registrant as Specified in Its Charter)

                                    DELAWARE
                          (State or Other Jurisdiction
                         Incorporation or Organization)


                                   04-3169145
                                (I.R.S. Employer
                               Identification No.)


                         101 MAIN STREET, CAMBRIDGE, MA
                    (Address of Principal Executive Offices)

                                      02142
                                   (Zip Code)

                                  617-250-2500
              (Registrant's Telephone Number, Including Area Code)

                                       N/A
         (Former Name, Former Address and Former Fiscal Year, if Changed
                               Since Last Report)

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 November 13, 1998 there were 16,310,310 shares of Common Stock, $.01 par
value, outstanding.

================================================================================



<PAGE>



                INTERNATIONAL INTEGRATION INCORPORATED ("i-Cube")

                                      INDEX

<TABLE>
<CAPTION>

                                                                               Page
                                                                              Number
                                                                              ------
<S>                                                                              <C>
PART I    FINANCIAL INFORMATION:

Item 1.   Financial Statements

          Consolidated Balance Sheets as of September 30, 1998 and
          December 31, 1997                                                      3

          Consolidated Statements of Income for the Three and Nine Months
          Ended September 30, 1998 and 1997                                      4

          Consolidated Statements of Cash Flows for the Nine Months
          Ended September 30, 1998 and 1997                                      5

          Notes to Consolidated Financial Statements                           6-7

Item 2.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations                                           8-14

PART II   OTHER INFORMATION:

Item 2.   Changes in Securities and Use of Proceeds                             15

Item 5.   Other Information                                                     16

Item 6.   Exhibits and Reports on Form 8-K                                      16

Signatures                                                                      17

Exhibit Index                                                                   18

Exhibit 27.1  Financial Data Schedule

</TABLE>



                                       2

<PAGE>


                INTERNATIONAL INTEGRATION INCORPORATED ("i-Cube")
                           CONSOLIDATED BALANCE SHEETS
                 (in thousands except share and per share data)


<TABLE>
<CAPTION>
                                                              September 30,  December 31,
                                                                 1998            1997
                                                              -------------  ------------
                                                              (unaudited)
<S>                                                             <C>            <C>
ASSETS
Current assets:
     Cash and cash equivalents                                  $36,530        $10,822
     Short-term investments                                       4,467             --
     Accounts receivable, net of reserve of $135 and $196,
       respectively                                               5,124          5,906
     Unbilled revenues                                            2,090            708
     Prepaid expenses and other current assets                      519            429
     Deferred income taxes                                        1,361            812
                                                                -------        -------
          Total current assets                                   50,091         18,677
Property and equipment, at cost:
     Computers and equipment                                      2,779          2,527
     Furniture and fixtures                                       1,028            602
                                                                -------        -------
          Total property and equipment, at cost                   3,807          3,129
     Less-accumulated depreciation                                1,466            838
                                                                -------        -------
          Total property and equipment, net                       2,341          2,291
Other assets                                                        691            144
                                                                -------        -------
          Total assets                                          $53,123        $21,112
                                                                =======        =======
LIABILITIES AND SHAREHOLDERS' EQUITY 
Current liabilities:
     Accounts payable                                           $   549        $   483
     Accrued expenses                                             5,144          2,956
     Current portion of long-term obligations                        90            268
     Accrued income taxes                                           975              1
     Deferred revenues                                            3,231          7,116
                                                                -------        -------
          Total current liabilities                               9,989         10,824
Long-term obligations                                               255            672
Stockholders' equity:
     Preferred stock $0.01 par value; 1,000,000 shares
       authorized; no shares issued or outstanding                   --             --
     Common stock $0.01 par value; 100,000,000 shares
       authorized; 16,194,903 and 12,966,889
       shares issued at September 30, 1998 and                      162            129
       December 31, 1997, respectively; 16,194,903 and
       12,963,888 shares outstanding at September 30, 1998
       and December 31, 1997, respectively                       29,808          1,516
     Additional paid-in capital 
     Treasury stock, 0 and 3,001 shares at cost, 
       respectively                                                  --             (8)
     Note receivable from stockholder                              (533)          (533)
     Retained earnings                                           13,432          8,512
     Cumulative translation adjustment                               10             --
                                                                -------        -------
          Total stockholders' equity                             42,879          9,616
                                                                -------        -------

          Total liabilities and stockholders' equity            $53,123        $21,112
                                                                =======        =======
</TABLE>



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




                                       3
<PAGE>



                INTERNATIONAL INTEGRATION INCORPORATED ("i-Cube")
                        CONSOLIDATED STATEMENTS OF INCOME
                      (in thousands, except per share data)
                                   (unaudited)

                                            Three Months         Nine Months
                                                Ended               Ended
                                            September 30,       September 30,
                                         -----------------   -------------------
                                           1998      1997      1998       1997
                                         -------   -------   --------   --------
Net revenues                             $10,821   $ 7,093   $ 29,550   $ 19,324
Project personnel and software costs       4,458     2,914     12,104      7,388
                                         -------   -------   --------   --------
          Gross profit                     6,363     4,179     17,446     11,936

Operating expenses:
     Selling and marketing                 1,201       770      3,127      2,208
     General and administrative            2,509     1,690      7,166      4,859
                                         -------   -------   --------   --------
          Total operating expenses         3,710     2,460     10,293      7,067
                                         -------   -------   --------   --------

Operating income                           2,653     1,719      7,153      4,869
Other income, net                            572       115        868        243
                                         -------   -------   --------   --------
          Income before income taxes       3,225     1,834      8,021      5,112

Provision for income taxes                 1,257       715      3,100      1,993
                                        --------  --------  ---------  ---------
          Net income                     $ 1,968   $ 1,119   $  4,921   $  3,119
                                        ========  ========  =========  =========

Earnings per share:
     Basic                               $  0.12   $  0.09   $   0.34   $   0.25
     Diluted                             $  0.10   $  0.07   $   0.27   $   0.21

Weighted average shares outstanding:
     Basic                                16,177    12,535     14,396     12,549
     Diluted                              20,173    15,428     18,101     14,832



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



                                       4

<PAGE>



                INTERNATIONAL INTEGRATION INCORPORATED ("i-Cube")
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                  Nine Months Ended
                                                                    September 30,
                                                                 -------------------
                                                                   1998       1997
                                                                 --------   --------
<S>                                                              <C>        <C>
Cash flows from operating activities:
     Net income                                                  $ 4,921    $ 3,119
     Adjustments to reconcile net income to net cash provided
       by operating activities:
          Depreciation and amortization                              628        351
          Provision for doubtful accounts                             24
          Loss on disposal of fixed assets                            --         97
          Deferred income taxes                                     (549)        --
          Changes in operating assets and liabilities:
               Accounts receivable                                   758      1,773
               Unbilled revenues                                  (1,382)       222
               Prepaid expenses and other current assets             (90)      (212)
               Accounts payable                                       66        494
               Accrued expenses                                    2,188      1,074
               Accrued income taxes                                  974        (66)
               Deferred revenues                                  (3,885)     1,090
                                                                 -------    -------
                    Net cash provided by operating activities      3,653      7,942

Cash flows from investing activities:
     Purchases of short-term investments                          (4,467)        --
     Purchases of property and equipment                            (678)    (1,541)
     Other                                                          (548)       (70)
                                                                 -------    -------
                    Net cash used in investing activities         (5,693)    (1,611)

Cash flows from financing activities:
     Repayment of long-term obligations                             (594)      (144)
     Proceeds from equipment line of credit                           --        500
     Proceeds from exercise of stock options                         430        128
     Proceeds from initial public offering                        27,902         --
     Purchase of treasury stock                                       --         (7)
                                                                 -------    -------
                    Net cash provided by financing activities     27,738        477
                                                                 -------    -------

Effect of exchange rates on cash and cash equivalents                 10         --
                                                                 -------    -------
Net increase in cash and cash equivalents                         25,708      6,808
Cash and cash equivalents, beginning of period                    10,822      3,889
                                                                 -------    -------
Cash and cash equivalents, end of period                         $36,530    $10,697
                                                                 =======    =======

</TABLE>


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



                                       5

<PAGE>



                INTERNATIONAL INTEGRATION INCORPORATED ("i-Cube")
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

1. BASIS OF PRESENTATION

        The accompanying unaudited consolidated financial statements have been
    prepared by International Integration Incorporated ("i-Cube" or the
    "Company") pursuant to the rules and regulations of the Securities and
    Exchange Commission for interim reporting. Accordingly, they do not include
    all of the information and footnotes required by generally accepted
    accounting principles for complete financial statements and should be read
    in conjunction with the consolidated financial statements and notes thereto
    for the year ended December 31, 1997 included in the Company's Registration
    Statement on Form S-1 (File No. 333-50889). The accompanying consolidated
    financial statements reflect all normal and recurring adjustments which are,
    in the opinion of management, necessary for a fair presentation of results
    for these interim periods presented. The results of operations for the three
    and nine month periods ended September 30, 1998, are not necessarily
    indicative of results to be expected for the full year.

2. EARNINGS PER SHARE

        The Company has adopted Statement of Financial Accounting Standards
    ("SFAS") No. 128, "Earnings Per Share," in the year ended December 31, 1997.
    All historical earnings per share ("EPS") data have been presented to
    conform to the provisions of this statement. SFAS No. 128 requires the
    presentation of basic and diluted EPS. Basic EPS is computed by dividing net
    income by the weighted average number of common shares outstanding for the
    period. Diluted EPS is computed using the weighted average number of common
    shares outstanding plus the dilutive effect of common stock equivalents
    (using the treasury stock method).

        The following table reconciles the denominator of the basic and diluted
    earnings per share computation as shown on the Consolidated Statements of
    Income (in thousands):

<TABLE>
<CAPTION>
                                                 Three Months           Nine Months
                                                     Ended                 Ended
                                                 September 30,         September 30,
                                              -------------------   ------------------
                                                1998       1997       1998       1997
                                              --------   --------   --------   -------
                                                 (unaudited)           (unaudited)
  <S>                                           <C>        <C>        <C>       <C>   
  Basic common shares outstanding..........     16,177     12,535     14,396    12,549
  Stock options............................      3,996      2,893      3,705     2,283
                                              --------   --------   --------   -------

  Diluted common and common equivalent 
    shares.................................     20,173     15,428     18,101    14,832
                                              ========   ========   ========   =======
</TABLE>


    Options to purchase shares of the Company's common stock of 12,000 and
    107,000 for the three and nine month periods ended September 30, 1998,
    respectively, were outstanding during the respective periods but were not
    included in the computation of diluted EPS because the exercise prices of
    the options were greater than the average market price of the common stock
    for the periods reported.

3. NEW ACCOUNTING PRONOUNCEMENTS

        In March 1998, Statement of Position ("SOP") 98-1, "Accounting for the
    Cost of Computer Software Developed or Obtained for Internal Use," was
    issued which provides guidance in addressing whether and under what
    condition the costs of internal-use software should be capitalized. SOP 98-1
    is effective for transactions entered into in fiscal years beginning after
    December 15, 1998, although earlier adoption is encouraged. The Company
    adopted the guidelines of SOP 98-1 as of January 1, 1998, and the impact of
    such adoption was not material to results of operations or of cash flows for
    the three and nine month periods ended September 30, 1998.



                                       6

<PAGE>


                INTERNATIONAL INTEGRATION INCORPORATED ("i-Cube")
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued
                                   (unaudited)

        In June 1997, SFAS No. 130, "Reporting Comprehensive Income," was
    issued. SFAS No. 130 establishes standards for reporting comprehensive
    income and its components in the body of the financial statements.
    Comprehensive income includes net income as currently reported under
    Generally Accepted Accounting Principles and also considers the effect of
    additional economic events that are not required to be recorded in
    determining net income but are rather reported as a separate component of
    stockholders' equity. These events include certain foreign currency
    transactions accounted for under SFAS No. 52, "Foreign Currency
    Translation," and unrealized gains and losses on investments in marketable
    securities accounted for under SFAS No. 115, "Accounting for Certain
    Investments in Debt and Equity Securities." The Company has adopted SFAS No.
    130 in 1998 and the impact of such adoption was not material to results of
    operations or of cash flows for the three and nine month periods ended
    September 30, 1998.


                                       7

<PAGE>


                INTERNATIONAL INTEGRATION INCORPORATED ("i-Cube")
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

OVERVIEW

    International Integration Incorporated ("i-Cube") provides application
migration and custom software development services on a fixed-price, fixed-time
basis to Fortune 1000 companies and other large enterprises. i-Cube utilizes its
proprietary development methodologies and technologies, known as i-Structure, to
implement large-scale, complex application migration and custom development
projects based on a multi-tier client/server architecture. The Company offers a
full range of iMPACT services including information systems consulting,
application migration, custom software development, and customer support.

    The Company derives substantially all of its revenues from technology
consulting services. The Company's services are principally provided on a
fixed-price, fixed-time basis. In developing the fixed price of a project, the
Company follows a process that assesses the technical complexity of the project,
the nature of the work, the functions to be performed, the resources required to
complete the engagement, and the extent to which the Company will deploy its
internally-developed software tools to deliver the solution.

    The Company typically receives a substantial advance payment from its
customers upon contract signing, with additional payments required upon the
attainment of project milestones. Deferred revenues consist principally of
amounts billed in advance for the Company's technology consulting contracts that
will be recognized upon performance and amounts billed to customers in excess of
revenues recognized to date.

    The Company has traditionally depended upon a few major clients for a
majority of its revenues. During the nine months ended September 30, 1998
revenues from four clients accounted for 22%, 15%, 11% and 11% of the Company's
net revenues. During the comparable period in 1997, revenues from five clients
accounted for 30%, 18%, 13%, 12%, and 12% of the Company's net revenues.
Although the Company's strategy is to broaden its customer base, there can be no
assurance that such customer concentration will actually diminish, and the
Company anticipates that its results of operations in any given period will
continue to depend to a significant extent upon contracts with a small number of
customers.

     The Company's revenues and earnings may fluctuate from quarter to quarter
based on the number, size, and scope of projects in which the Company is
engaged, the contractual terms and degree of completion of such projects, any
delays incurred in connection with a project, the accuracy of estimates of
resources required to complete ongoing projects, general economic conditions,
and other factors. See "Certain Factors That May Affect Future Results".

RESULTS OF OPERATIONS

    The following table sets forth certain items included in the Company's
Consolidated Statements of Income as a percentage of net revenues for the
periods indicated:

<TABLE>
<CAPTION>

                                    Three Months        Nine Months
                                        Ended              Ended
                                  ----------------   ---------------
                                    September 30,      September 30,
                                   1998      1997     1998     1997
                                  ------    ------   ------   ------
<S>                                 <C>       <C>      <C>      <C> 
Net revenues....................    100%      100%     100%     100%
Project personnel and software 
  costs.........................     41        41       41       38
                                  -----     -----    -----    -----
         Gross profit...........     59        59       59       62
Operating expenses:
   Selling and marketing........     11        11       11       12
   General and administrative...     23        24       24       25
                                  -----     -----    -----    -----
         Total operating
           expenses.............     34        35       35       37
                                  -----     -----    -----    -----
Operating income................     25        24       24       25
Other income, net...............      5         2        3        1
                                  -----     -----    -----    -----
         Income before income
           taxes................     30        26       27       26
Provision for income taxes......     12        10       10       10
                                  -----     -----    -----    -----
         Net income.............     18%       16%      17%      16%
                                  =====     =====    =====    =====

</TABLE>



                                       8
<PAGE>

NET REVENUES

    The Company's net revenues increased by $3.7 million, or 53%, to $10.8
million in the three months ended September 30, 1998 from $7.1 million for the
comparable period in 1997. Net revenues increased by $10.2 million, or 53% to
$29.6 million in the first nine months of 1998 from $19.3 million for the
comparable period in 1997. This increase in net revenues was primarily
attributable to an increased volume of projects from new customers and the
leveraging of existing client relationships to obtain repeat business. During
the three months ended September 30, 1998, the Company's five largest customers
accounted for 68% of net revenues as compared to 90% for the comparable period
in 1997. During the three months ended September 30, 1998, the Company had four
customers that each accounted for 10% or more of net revenues.

PROJECT PERSONNEL AND SOFTWARE COSTS

    Project personnel and software costs consist primarily of compensation and
related costs of personnel dedicated to customer assignments and personnel
assigned to developing and enhancing the Company's methodologies and
technologies deployed during the project delivery process. Project personnel and
software costs also include fees paid to subcontractors for work performed in
connection with projects and non-reimbursed project travel expenses. Project
personnel and software costs increased 53%, to $4.5 million in the three months
ended September 30, 1998 from $2.9 million for the comparable period in 1997. As
a percentage of net revenues, these costs were 41% in the 1998 and 1997 periods.
Project personnel and software costs increased 64%, to $12.1 million in the nine
months ended September 30, 1998 from $7.4 million for the comparable period in
1997. As a percentage of net revenues, these costs were 41% and 38%,
respectively, in the 1998 and 1997 periods. The absolute dollar increase in
project personnel and software costs in the three-month period in 1998 and the
dollar and percentage increase in the nine-month period in 1998 were primarily
attributable to the hiring of additional and more experienced personnel required
to deliver the Company's services and increases in per person compensation
costs. Project personnel headcount increased to 192 at September 30, 1998 from
118 at September 30, 1997.

SELLING AND MARKETING

    Selling and marketing costs consist primarily of compensation and related
costs of sales and marketing personnel, travel expenses, and marketing programs
and promotion costs. Selling and marketing costs increased 56%, to $1.2 million
in the three months ended September 30, 1998 from $0.8 million for the
comparable period in 1997. As a percentage of net revenues, these costs were 11%
in the three months ended September 30, 1998 and 1997. Selling and marketing
costs increased 42% to $3.1 million in the nine months ended September 30, 1998
from $2.2 million for the comparable period in 1997. As a percentage of net
revenues, these costs were 11% in the nine months ended September 30, 1998 and
12% in the nine months ended September 30, 1997. The increase in selling and
marketing costs in absolute dollars was primarily attributable to increased
spending on promotional activities. Sales and marketing personnel remained
constant at 20 employees at September 30, 1998 and 1997.

GENERAL AND ADMINISTRATIVE

    General and administrative costs consist primarily of compensation and
related costs of the Company's management and administrative functions,
including finance and accounting, human resources, internal information
technology, and the costs of the Company's facilities and other general
corporate expenses. General and administrative costs increased 48% to $2.5
million in the three months ended September 30, 1998 from $1.7 million for the
comparable period in 1997. As a percentage of net revenues, these costs were 23%
and 24%, respectively, in the three months ended September 30, 1998 and 1997.
General and administrative costs increased 47% to $7.2 million in the nine
months ended September 30, 1998 from $4.9 million for the comparable period in
1997. As a percentage of net revenues, these costs were 24% and 25%,
respectively, in the nine months ended September 30, 1998 and 1997. The decline
in general and administrative costs as a percentage of revenues reflects a
decline in administrative staff as a percentage of total staff and more
efficient space utilization of the Company's facilities in 1998. The increase in
general and administrative costs in absolute dollars was primarily attributable
to an increase in general and administrative personnel to 32 at September 30,
1998 from 13 at September 30, 1997.

OTHER INCOME, NET

    Other income, net consists primarily of interest income from the Company's
cash, cash equivalents, and short-term investment balances and interest expense
associated with fixed asset purchases made under the Company's equipment line of
credit and obligations under capital leases. Other income, net was $0.6 million
and $0.1 million for the three months ended September 30, 1998 and 1997,
respectively. Other income, net was $0.9 million and $0.2 million for the nine
months ended September 30, 1998 and 1997, respectively. The increase in other
income, net was principally due to the increase in cash, cash equivalents, and
short-term investments which included net proceeds from the Company's initial
public offering in the second quarter of 1998. The Company invests its cash,
cash equivalents, and short-term investments primarily in overnight repurchase
agreements, short-term U.S. Treasury and Agency bonds, and short-term
commercial paper.



                                       9

<PAGE>

PROVISION FOR INCOME TAXES

    The Company's combined effective rate for federal and state income taxes was
39% for 1998 and 1997.

LIQUIDITY AND CAPITAL RESOURCES

    Prior to its initial public offering, the Company met its working capital
requirements through cash generated from operations. In June 1998, the Company
completed an initial public offering of common stock resulting in net proceeds
of approximately $27.9 million. The Company also maintains a $5.0 million
revolving line of credit (the "Line") with Silicon Valley Bank, which expires in
September 1999. Under the Line, the Company may borrow the lesser of $5.0
million or 75% of eligible accounts receivable, as defined in the loan
agreement. The Company is required to comply with certain operational and
financial covenants under the Line if there are borrowings under the Line. At
September 30, 1998 the Company was in compliance with these requirements and no
borrowings have been made under the Line.

    The Company's cash and cash equivalent balances increased to $36.5 million
at September 30, 1998 from $10.8 million at December 31, 1997. The increase in
cash was primarily due to proceeds from the Company's initial public offering
and cash generated from operations. The Company's working capital was $40.1
million at September 30, 1998 as compared to $7.9 million at December 31, 1997.

    The Company's operating activities provided cash from operations of $3.7
million for the nine months ended September 30, 1998 as compared to $7.9 million
provided from operations for the comparable period in 1997. The decrease in cash
provided from operations in 1998 as compared to 1997 was due principally to an
increase in unbilled revenues in 1998 as compared to a decrease in 1997 and to a
decrease in deferred revenues in 1998 as compared to an increase in 1997. The
increase in unbilled revenues and decrease in deferred revenues in 1998 were the
result of the timing of milestone billings on some of the Company's fixed price
contracts.

    The Company used cash of $5.7 million for investing activities for the nine
months ended September 30, 1998 as compared to $1.6 million used in the
comparable period of 1997. Cash used for investing activities consisted
primarily of purchases of short-term investments, purchases of property and
equipment used to support the growing base of employees, and costs associated
with the implementation of the Company's internal financial system.

NEW ACCOUNTING PRONOUNCEMENTS

    In March 1998, Statement of Position ("SOP") 98-1, "Accounting for the Cost
of Computer Software Developed or Obtained for Internal Use," was issued which
provides guidance in addressing whether and under what condition the costs of
internal-use software should be capitalized. SOP 98-1 is effective for
transactions entered into in fiscal years beginning after December 15, 1998,
however earlier adoption is encouraged. The Company adopted the guidelines of
SOP 98-1 as of January 1, 1998, and the impact of such adoption was not material
to results of operations or of cash flows for the three or nine months ended
September 30, 1998.

    In June 1997, SFAS No. 130, "Reporting Comprehensive Income," was issued.
SFAS No. 130 establishes standards for reporting comprehensive income and its
components in the body of the financial statements. Comprehensive income
includes net income as currently reported under Generally Accepted Accounting
Principles and also considers the effect of additional economic events that are
not required to be recorded in determining net income but are rather reported as
a separate component of stockholders' equity. These events include certain
foreign currency transactions accounted for under SFAS No. 52, "Foreign Currency
Translation," and unrealized gains and losses on investments in marketable
securities accounted for under SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities." The Company has adopted SFAS No. 130 in 1998 and
the impact of such adoption was not material to results of operations or of cash
flows for the three and nine month periods ended September 30, 1998.




                                       10
<PAGE>

YEAR 2000

    In the past, many information technology products were designed with two
digit year codes that did not recognize century and millennium fields. As a
result, these hardware and software products may not function or may give
incorrect results with respect to dates after December 31, 1999, and is
generally referred to as the "Year 2000" problem or issue. The Year 2000 issue
is faced by substantially every company in the computer or information
technology industries, as well as every company which relies on computer systems
or which utilizes products which include embedded technology.

    The Company is currently in the process of assessing its exposure to the
Year 2000 problem. Generally, the Company is assessing its Year 2000 exposure in
four major areas: (i) problems arising from systems previously developed for
customers; (ii) delays in existing projects by the Company's customers as they
shift internal resources to complete their Year 2000 mitigation, and delays in
the purchasing patterns of clients and potential clients with respect to new
projects; (iii) Year 2000 problems faced by the Company's material suppliers
which could have an impact on the Company's business, results of operations or
financial condition; and (iv) Year 2000 problems existent in the Company's
internal information technology ("IT") systems and non-IT systems. At this time,
the Company is unable to estimate the costs of addressing its Year 2000 issues,
if any, or of possible worst case Year 2000 scenarios, and the Company has not
yet developed a contingency plan for handling the most reasonably likely worst
case scenario.

    The Company is in the process of assessing systems previously developed 
for customers and believes that they are Year 2000 compliant. However, there
can be no assurances that the Company's systems do not contain undetected errors
or defects associated with Year 2000 compliance issues, or that third party
software included in the systems developed by the Company do not contain Year
2000 problems. Certain of the Company's agreements with its customers contain
warranties that the systems developed by the Company will not experience Year
2000 problems. To the extent that a problem arises, the Company may be required
to expend funds to remedy the problem, or, if asserted, to pay damages incurred
by the customer as a result of such failure. In addition, to the extent that a
Year 2000 problem is identified in a system developed under a contract without a
Year 2000 warranty, the Company may nevertheless expend resources to remedy the
problem, in certain circumstances at its own cost. Although the Company's
contracts with its customers generally contain provisions which seek to insulate
the Company from, or limit the amount of, any liability arising from claims
asserted against the Company, there can be no assurance that any such
limitations would be upheld in favor of the Company. The Company is aware of a
growing number of lawsuits against other providers of IT services. Because of
the unprecedented nature of such litigation, it is uncertain to what extent the
Company may be affected by such litigation. Due to the complexity of the Year
2000 issue, upon any failure of critical client systems or processes that may be
directly or indirectly connected or related to systems or software designed,
developed, customized, or implemented by the Company as described above, the
Company may be subjected to claims regardless of whether the failure is related
to the services provided by the Company. If asserted, such claims (including the
associated defense costs) could have a material adverse effect on the Company's
business, operating results, and financial condition.

    The Company is in the process of conducting a survey of its major customers
to determine their Year 2000 readiness and the likelihood that the customers
will delay scheduled or in-process contracts, or defer future contracts with the
Company, in order to allocate more IT resources to solving their Year 2000
problems. In addition, the Company continually seeks feedback from its
salespersons as to the impact that the Year 2000 readiness of prospective
customers and the effect it may have on the Company's future revenues. There can
be no assurance that the Company's customers and prospective customers will not
delay scheduled, in-process, or future projects as a result of their own Year
2000 remediation efforts. Any such delays could have a material adverse impact
on the Company's business, operating results, and financial condition.

    The Company is in the process of determining the nature and extent of the
work required, if any, to make its internal IT systems Year 2000 compliant. The
Company's internal IT systems consist principally of its accounting and human
resources software. The licensor of the software has indicated to the Company
that the products are Year 2000 compliant. However, if Year 2000 issues of which
the Company is not currently aware arise and are not remediated on time, or if
the Company is required to pay for any required updating, modification or
replacement of the Company's information systems, the Year 2000 issue could have
a material adverse impact on the Company's business, operating results, and
financial condition. The Company is also assessing its utilization of non-IT
systems which contain embedded technology such as microcontrollers. Following
its determination of such utilization, the Company expects to contact the
providers of any material non-IT systems to determine whether the systems are
Year 2000 compliant, and if not, whether such systems will be remediated or will
need to be replaced.

    In addition to the Company's internal systems, the Company relies on third
party vendors in the conduct of its business. The Company's material vendors
(other than providers of utilities and other services, such as electricity,
telephone, water, and Internet services) include its payroll service provider
and the licensors of software tools and technologies used in the development of,
or embedded in, systems developed by the Company for its customers. The Company
is in the process of seeking assurances from its material vendors and suppliers
that there will be no interruption of service as a result of the Year 2000
issue. There can be no assurance that any service interruption on the part of
one or more of the Company's third party suppliers will not have a material
adverse effect on the Company's business, operating results, and financial
condition. In addition, the failure on the part of the accounting systems of the
Company's clients due to the Year 2000 issue could result in a delay in the
payment of invoices issued by the Company for services and expenses. A failure
of the accounting systems of a significant number of the Company's clients would
have a material adverse effect on the Company's business, operating results, and
financial condition.



                                       11

<PAGE>

    Through September 30, 1998, the Company had not incurred material costs
directly relating to the remediation of Year 2000 problems. Pending further
progress in its assessment of its exposure to the Year 2000 problem, as
described in the preceding paragraphs, the Company is unable to estimate the
costs of remediating the Year 2000 problem that it may incur in the future.

    The Securities and Exchange Commission has asked publicly-traded companies
to include a reasonable description of their most reasonably likely worst case
Year 2000 scenario. As of the date of this report, the Company is uncertain as
to such scenario. However, the Company intends to address this uncertainty by
continuing to assess its exposure to the Year 2000 problem, as described above.
The Company intends to consider this scenario in its financial and strategic
planning for 1999 and 2000, including in its projected personnel needs and other
areas. As of September 30, 1998, the Company is not able to estimate revenue
lost due to Year 2000 issues.

    The Company has not yet established a contingency plan for addressing the
most reasonably likely worst case Year 2000 scenario. The Company intends to
establish such a plan to the extent the Company believes it necessary to do so,
based on the impact that such scenario is expected to have on the Company's
business, operating results, and financial condition.

SAFE HARBOR PROVISION

    This Form 10-Q includes forward-looking statements (statements that are not
historical facts) such as statements about future net revenues and profits,
capital expenditures, liquidity sources and needs, working capital needs,
increase in personnel and related costs, opening additional offices, general and
administrative expenses, sales and marketing expenses, and other costs as a
percentage of net revenues. These forward-looking statements are subject to
several risks and uncertainties and the Company's actual future results may
differ significantly from those stated in any forward looking statements. While
it is impossible to identify each factor and event that could affect the
Company's results, variations in the Company's revenues and operating results
occur from time to time as a result of a number of factors, such as the
significance of client engagements commenced and completed during the period,
the number of working days in a period, employee hiring, retention, and
acceptance and profitability of the Company's services in new territories. The
timing of revenues is difficult to forecast because the Company's sales cycle is
relatively long in the case of new clients and may depend on factors such as the
size and scope of the assignments and general economic conditions. Because a
high percentage of the Company's expenses are relatively fixed, a variation in
the timing of the initiation or the completion of client assignments,
particularly at or near the end of any quarter, can cause significant variations
in operating results from period to period.

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's results of operations have varied significantly in the past
and may vary significantly in the future, on a quarterly and annual basis, as a
result of a variety of factors, many of which are outside the Company's control.
The Company's expense levels are based, in significant part, on anticipated
contract requirements and on other expectations of future revenues and are
relatively fixed in the short-term. Consequently, if revenue levels are below
expectations, including without limitation as a result of an unanticipated delay
in or termination of a customer engagement, expense levels could be
disproportionately high as a percentage of net revenues, and the Company's
business, financial condition and results of operations would be materially
adversely affected.

    The Company has historically derived, and may in the future derive, a
significant amount of its net revenues from major engagements with a relatively
small number of customers. Although the Company's largest customers have varied
from period to period, the Company anticipates that its results of operations in
any given period will continue to depend to a significant extent upon large
contracts with a small number of customers.

    Many of the Company's projects are large, complex engagements that are
performed by the Company over extended periods of time. The Company is generally
paid for these projects in installments, based on the achievement of certain
milestones. The Company's ability to successfully complete these projects and to
earn the milestone payments is based on factors within and outside the Company's
control. Furthermore, because of the significant numbers of IT professionals



                                       12
<PAGE>

assigned by the Company to these large projects, unexpected early terminations
of any of such engagements could result in underutilization of project personnel
until such persons can be redeployed to other projects. Conversely, an
unexpected delay in the completion of a major engagement could result in a delay
in the redeployment of project personnel to new assignments for which the
Company is contractually committed to achieve milestones on a timely basis. The
Company's failure or inability to meet a customer's expectations in the
performance of its services could give rise to claims against the Company or
damage the Company's reputation and adversely affect its ability to attract new
business.

    The Company generally undertakes projects on a fixed-price, fixed-time
basis, and warrants defined project deliverables as specified in mutually agreed
upon statements of work. In making proposals for fixed-price, fixed-time
contracts, the Company relies on its estimated costs and timing for completing
the project. Any increased or unexpected costs or unanticipated delays in
connection with the performance of fixed-price, fixed-time contracts, including
delays caused by factors outside the Company's control, could affect the
profitability of these contracts and have a material adverse effect on the
Company's business, financial condition and results of operations.

    The Company's business, financial condition and results of operations may be
adversely affected by the Year 2000 problems described above.

    The Company has experienced growth in net revenues and expansion of its
operations which have placed, and are expected to continue to place, significant
demands on the Company's managerial, operational and financial resources.

    The Company's success depends to a significant extent on its ability to
attract, train, motivate and retain highly skilled IT professionals,
particularly project managers, software engineers and other senior technical
personnel. There is currently a shortage of, and significant competition for,
software development and other IT professionals with the advanced technological
skills necessary to perform the services offered by the Company. This shortage
has caused wages for such professionals to increase, which increases operating
costs to IT service providers such as the Company.

    The time between the date of initial contact with a potential customer and
the execution of a contract with that customer is often lengthy, typically
ranging from six weeks for smaller engagements to nine months or more for the
Company's larger engagements, and is subject to delays over which the Company
has little or no control, including customers' budgetary constraints, customers'
internal acceptance reviews, the success and continued internal support of
customers' own development efforts, and the possibility of cancellation or delay
of projects by customers. During such sales cycle, the Company may expend
substantial funds and management resources and yet not obtain project awards or
revenues.

    The Company has developed and may continue to develop marketing
relationships with third parties that offer products or services that are
complementary to those offered by the Company. There can be no assurance that
the Company can successfully maintain these relationships or establish similar
relationships with others.

    The market for the Company's services is characterized by innovation and
rapid technological change, evolving industry standards and changing customer
preferences. Both the needs of potential customers and the technologies
available for meeting those needs can change significantly within a short period
of time. The Company has derived a significant portion of its revenues from
projects based primarily on client/server architectures. These technologies are
continuing to develop and are subject to rapid change. Any factors negatively
affecting the acceptance of such technologies could have a material adverse
effect on the Company's business, financial condition and results of operations.

    The Company's future will depend in part on its ability to continually
enhance its services, to develop services that address the needs of its
customers and potential customers, and to continue to improve its i-Structure
methodologies and technologies. There can be no assurance that the Company will
be successful in developing and marketing services that respond to technological
changes, that the Company will enhance its i-Structure methodologies and
technologies on a timely or cost-effective basis, or that the Company's
services, methodologies and technologies will adequately meet the requirements
of the marketplace.

    The Company's future success depends to a significant extent on its
executive officers. The loss of the services of any one or more of these
individuals could have a material adverse effect on the Company's business,
financial condition and results of operations.

    The Company operates in a highly competitive and rapidly changing market and
competes with a variety of organizations that offer services similar to those
offered by the Company. There can be no assurance that the Company will be able
to continue to compete successfully with its existing competitors or that it
will be able to compete successfully with new competitors.



                                       13
<PAGE>

    The Company's success and its ability to compete is dependent, in part, upon
its proprietary rights, including its rights in i-Structure methodologies and
technologies. The Company relies primarily on a combination of copyright,
trademark and trade secret laws to establish and protect its proprietary rights.
There can be no assurance that such measures will be adequate to protect the
Company's proprietary rights. Although the Company believes that its services
and technologies do not infringe on the intellectual property rights of others,
there can be no assurance that infringement claims will not be asserted against
the Company in the future.

    The Company's agreements with its customers typically contain provisions
designed to limit the Company's exposure to claims relating to the Company's
professional services and the applications developed by it. However, it is
possible that the limitation of liability provisions contained in the Company's
agreements may not adequately protect the Company or be effective under the laws
of certain jurisdictions.

    Software applications as complex as those developed by the Company
frequently contain errors or defects, especially when first implemented. Any
such defects or errors could result in delayed or lost revenues, adverse
customer reaction, negative publicity regarding the Company and its services and
harm to the Company's reputation, or could require expensive corrections, any of
which could have a material adverse effect on the Company's business, financial
condition and results of operations.

    The Company expects that net revenues from international operations,
principally in Europe, may account for an increasingly significant amount of the
Company's net revenues. As a result, the Company is subject to a number of risks
that can adversely affect international operations.




                                       14
<PAGE>


                           PART II. OTHER INFORMATION

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

    During the quarter ended September 30, 1998, the Company sold 51,151
securities that were not registered under the Securities Act. All of such
securities were issued upon the exercise of stock options of the Company, at an
average exercise price of $1.87 per share, in reliance on Rule 701 under the
Securities Act.

    On June 22, 1998, the Company commenced the initial public offering of its
Common Stock ("the Offering") pursuant to a Registration Statement on Form S-1
(File number 333-50889, declared effective June 22, 1998). The Offering closed
on June 26, 1998, resulting in the sale of 2,875,000 shares of Common Stock (of
which, 2,605,000 shares were sold by the Company and 270,000 shares were sold
for the account of certain shareholders) at a public offering price of $12.00
per share (constituting aggregate gross proceeds of $31,260,000 for the account
of the Company and $3,240,000 for the account of the selling stockholders).

    The managing underwriters of the Offerings were Morgan Stanley Dean Witter,
BT Alex. Brown, and UBS Securities.

    Through September 30, 1998, the following expenses were incurred for the
Company's account in connection with the Offering (in thousands):

<TABLE>
<CAPTION>
                                                     Offering of
                                                    Common Stock
                                                    ------------
     <S>                                            <C>         
     Underwriting discount......................    $      2,188
     Expenses paid to or for underwriters.......             122
     Other expenses (estimate)..................           1,048
                                                    ------------

     Total Offering costs.......................    $      3,358
                                                    ============

     Net Offering proceeds......................    $     27,902
                                                    ============
</TABLE>


The payments shown as "Other expenses" were made to persons other than
directors, officers or their associates, persons owning ten percent or more of
any class of equity securities of the issuer, or affiliates of the issuer.

    Through September 30, 1998 the net proceeds of the Offering were used as
follows (in thousands):

<TABLE>
<CAPTION>
                                                       Use of
                                                    Net Proceeds
                                                    ------------
     <S>                                            <C>         
     Working capital............................    $         --
     Other use of proceeds......................              --
     Temporary investments......................          27,902
                                                    ------------

       Total use of proceeds....................    $     27,902
                                                    ============

</TABLE>

Temporary investments consist of overnight repurchase agreements, short-term
U.S. Treasury and Agency bonds, and short-term commercial paper.

    None of the net proceeds of the Offerings were paid to directors, officers
or their associates, persons owning ten percent or more of any class of equity
securities of the issuer, or affiliates of the issuer.





                                       15

<PAGE>


ITEM 5.  OTHER INFORMATION

    Persons named in the Company's proxy for the 1999 Annual Meeting of
Stockholders will have discretionary authority to vote on any matter proposed by
a stockholder for consideration at the 1999 Annual Meeting that is not included
in the Company's proxy statement relating to such meeting if the Company has not
received notice of such proposal within a reasonable time before the Company
mails its proxy materials for such meeting.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

    (a)  Exhibits:

        Documents listed below, except for documents identified by footnotes,
        are being filed as exhibits herewith. Documents identified by footnotes,
        if any, are not being filed herewith and, pursuant to Rule 12b-32 of the
        General Rules and Regulations promulgated by the Commission under the
        Securities Exchange Act of 1934 (the "Exchange Act") reference is made
        to such documents as previously filed as exhibits with the Commission.
        The Company's file number under the Exchange Act is 000-24409.

        Exhibit 27.1  Financial Data Schedule

    (b) Reports on Form 8-K:

        None.





                                       16

<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.

Dated: November 16, 1998

INTERNATIONAL INTEGRATION INCORPORATED

                                  By: /s/ Lawrence P. Begley
                                      -------------------------------
                                  Lawrence P. Begley
                                  Executive Vice President
                                  & Chief Financial Officer











                                       17

<PAGE>



                INTERNATIONAL INTEGRATION INCORPORATED ("i-Cube")
                                  EXHIBIT INDEX



       Exhibit No.         Description
       -----------         -----------
       27.1                Financial Data Schedule









                                       18