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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
 
                             WASHINGTON, D.C. 20549
 
                                ---------------
 
                                   FORM 10-K
 
[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
 
                    For the Year Ended December 31, 1998, or
 
 
( )  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934
 
                         Commission File Number: 0-22993
                                ----------------
 
                            INDUS INTERNATIONAL, INC.
          (Exact name of Registrant issuer as specified in its charter)
 
           Delaware                                              94-3273443
(State or other jurisdiction of                               (I.R.S.) Employer
 incorporation or organization)                              Identification No.)
 
60 Spear Street, San Francisco, California                           94105
(Address of principal executive offices)                          (Zip code)
 
                                 (415) 904-5000
              (Registrant's telephone number, including area code)
 
                               -------------------
 
           Securities registered pursuant to Section 12(b) of the Act:
                                      None
 
           Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock, $.001 par value
                                (Title of Class)
                                ----------------
 
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports)  and  (2)  has  been  subject  to such  filing
requirements for the past 90 days. Yes X No___
 
Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)
 
The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant,  based upon the closing  sale price of the Common Stock on March 10,
1999 as reported on the Nasdaq National Market, was approximately  $42,177,854.
Shares of Common Stock held by each officer and director and by each person who
owns 5% or more of the outstanding  Common Stock have been excluded in that such
persons may by deemed to be affiliates.  This  determination  of affiliate
status is not necessarily a conclusive determination for other purposes.
 
The number of shares  outstanding of the  registrant's  Common Stock,  $.001 par
value was 31,774,206 at March 10, 1999.
 
                       DOCUMENTS INCORPORATED BY REFERENCE
 
Portions of the  Proxy Statement for Registrant's 1999 Annual Meeting of Stock-
holders to be held May 4, 1999 are incorporated by reference in Part III hereof,
to the extent stated herein.
 
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<PAGE>
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                              TABLE OF CONTENTS
 
 
 
 
PART I
   ITEM 1.  DESCRIPTION OF BUSINESS
   ITEM 2.  PROPERTIES
   ITEM 3.  LEGAL PROCEEDINGS
   ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
PART II
   ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
            MATTERS
   ITEM 6.  SELECTED FINANCIAL INFORMATION
   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATION
   ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
   ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
            FINANCIAL DISCLOSURE
 
PART III
   ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
   ITEM 11.  EXECUTIVE COMPENSATION
   ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
   ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
PART IV
   ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
 
SIGNATURES
 
 
 
 
<PAGE>
 
                                     PART I
 
ITEM 1.  DESCRIPTION OF BUSINESS
 
General
 
        Indus International, Inc. ("the Company") develops, markets,
implements and supports enterprise asset management software and service
solutions for capital intensive industries worldwide. Marketed
internationally as the Indus Solution Series, the offering consists of
business application systems and industry best practice service packages
which support such functional areas as: Asset & Work Management Systems,
Materials & Procurement Systems, Safety & Compliance Systems, and
Financial Integration products.  Indus Solutions are designed to
interoperate with popular third-party applications that provide best
business practices function to its customers. Through strategic
alliances, the Company works with Oracle Corporation ("Oracle"),
PeopleSoft, Inc. ("PeopleSoft"), and certain industry-specific vendors
to create a software series that provides seamless interoperability with
corporate and financial applications, expert systems, and certain
industry specific systems to provide complete enterprise-wide solutions
that enable the Company's customers to improve operating efficiencies,
reduce costs and comply with governmental regulation.  Markets of
primary focus for the Company's products include: the energy industry,
continuous process industries, industrial manufacturing, and the public
sector.  Segments within these capital intensive markets include:
electric and gas utilities, telecommunications providers, petrochemical
refineries, mining and metals manufacturers, forest product producers,
consumer packaged goods manufacturers, educational systems, and
governmental institutions.
 
        The software tools comprising the Indus Solution Series are based on
an open, client/server architecture featuring a layered and object-
oriented software design that enables customers to use various operating
systems, operate on multiple hardware platforms and interoperate with
many third-party software applications and legacy systems. Proprietary
systems implementation methodology tools and best practice education
tools facilitate rapid and effective deployment and utilization of its
Enterprise Asset Management (EAM) applications.
 
        The Company's Enterprise Asset Management solutions include
consulting services provided by subject matter experts. This unique
approach helps customers implement advanced EAM maintenance principles,
materials management theories, and other advanced strategies designed to
provide a competitive advantage to the customer. The service package
content comprising this business process improvement solution leverages
the knowledge gained from hundreds of customer implementations and the
extensive plant experience of the Company's employees, and the global
experience of its user community.
 
        Regionally located in close proximity to customer sites, the
Company's professional services organization supports the Indus sales
organization. The resulting process provides a high quality information
exchange as customers learn how the Indus Solution Series addresses
industry-specific requirements. The Company also offers global 7 (days a
week) x 24 (hours a day) multilingual customer support. The Company
believes this combination of enterprise software, vertically oriented
consulting services and worldwide customer support enables customers to
increase equipment and production capacity, reduce operating costs, and
safeguard the workforce and the environment.
 
        The Company is a leading provider of systems, products, and services
addressing the highly specialized needs of the Enterprise Asset
Management (EAM) market.  As of December 31, 1998, the Company products
were licensed for use by over 300,000 end users representing 440
customers in 48 countries.
 
        Indus, Indus Solution Series, IndusWorld, PassPort Software
Solutions, ABACUS, ABACUS Toolkit, PORTAL/G, PORTAL/95, PORTAL/97,
VIEWPORT, Prism Consulting, Enterprise MPAC, Curator and AssetWare,
AssetCare and CareNet are trademarks and servicemarks of the Company.
All other brand names or trademarks are the property of their respective
holders.
 
        The Indus Group, Inc., a California corporation entered into an
Agreement and Plan of Merger and Reorganization (the "Merger") on June
5, 1997 with TSW International, Inc., a Georgia corporation, pursuant to
which The Indus Group, Inc. and TSW International, Inc. each became
subsidiaries of a new Delaware corporation named Indus International,
Inc. ("the Company") which was formed for the purpose of the
transactions contemplated under the Merger.  The transaction was
accounted for as a pooling of interests for financial reporting purposes
and structured to qualify as a tax-free reorganization.  The
stockholders of each of The Indus Group, Inc. and TSW International,
Inc. approved the transaction and the Merger was consummated on August
25, 1997.
 
        On December 31, 1997, the Company's subsidiaries, The Indus Group,
Inc. and TSW International, Inc., each merged with and into the Company
(the "Roll-up Merger").  The Company, as the surviving corporation,
assumed all obligations of the two subsidiaries, in connection with the
Roll-up Merger.
 
Products and Services
 
        The Company offers software products and service packages, which
incorporate sophisticated EAM methodologies, extensive subject matter
expertise and advanced technology designed to interoperate seamlessly
with other enterprise business information systems. Marketed as the
Indus Solution Series, these business tools support the needs of an
organization's core decision makers in the operations and maintenance
workforce, inventory management and procurement professionals, safety
and compliance engineers, and related disciplines affected by asset care
decisions throughout the enterprise.  This customer user group is
supported by such Indus Software Solutions as: Asset & Work Management
Systems, Materials and Procurement Systems, and Safety and Compliance
Systems, which seamlessly integrate to third party corporate financial
systems from Oracle, PeopleSoft, and other providers. Beyond providing
departmental information to affected workgroups throughout the customer
organization, EAM techniques employed by the Company integrate process
control systems from vendors such as Allen-Bradley and Johnson Controls,
optimizing capacity utilization through just-in-time maintenance
management practices. The Indus Solution Series reflects EAM best
practices, including Reliability Centered Maintenance (RCM), Total
Productive Maintenance (TPM), web-based electronic commerce, and
handheld mobile units to enable customers to apply Indus Solutions as a
means to achieving a strategic and competitive advantage.
 
        A proprietary implementation methodology and set of data content
workbenches round out the service package offering available from the
regionally positioned professional services solutions centers throughout
the Americas, Europe, Middle East and Africa and Asia Pacific theaters
of operation. Marketed as ABACUS tools and implementation methodology,
ABACUS enables rapid implementation and configuration of Indus Software
Solutions. Workbenches are a set of software tools which support
application development, data migration and installation support used by
the Company and its customers to develop, install and configure Indus
Software Solutions. Integration products are also sold to enable Indus
Software Solutions to interoperate with corporate financial, payroll,
human resources, geographic information, outage management, and customer
information applications systems available, and other industry-specific
programs included in the Company's Business Partner Alliance program.
 
The Indus Software Solutions
 
        EAM application business systems comprising the Indus Solution Series
are designed to reflect the requirements of specific vertical industry
function, and the technical architecture traditionally employed in these
industries.  The resultant transaction engines are designed to support
Indus Solution Series products. Functions within the application product
lines have been tailored to encapsulate vertical business processing
requirements which are augmented by subject matter expertise and
consulting service packages, which uniquely position Indus to deliver a
total solution across the enterprise.
 
Indus Solution Series for Energy and Communications
 
        Indus Software Solutions for Energy and Telecommunications provide a
series of business applications and business process improvement service
packages which meet the needs of both integrated electric and gas
utilities or standalone utility business units including: nuclear
generating stations, non-nuclear steam generating facilities, a
utility's energy delivery business including transmission and
distribution, and systems designed to manage Department of Energy
facilities.  The specific needs of communications companies are also
addressed in a related offering for these firms.
 
Specific packaged solutions in this series include:
 
        Indus Solution Series for Nuclear Power Generation
        Indus Solution Series for Conventional Power Generation
        Indus Solution Series for Energy Delivery
        Indus Solution Series for Department of Energy
        Indus Solution Series for Telecommunications
 
Indus Solution Series for Integrated Manufacturing
 
        Indus Software Solutions for Integrated Manufacturing provide a set
of business applications, which meet the needs of capital-intensive
industrial manufacturing businesses seeking a competitive advantage
through the application of technology.  Business applications and
subject matter expertise in the areas of delivering advanced enterprise
asset management strategies across the enterprise have been packaged to
meet the needs of specific vertical industries in the series.
 
Specific packaged solutions in this series include:
 
        Indus Solution Series for Oil,Gas & Chemical
        Indus Solution Series for Metals & Mining
        Indus Solution Series for Pulp & Paper
        Indus Solution Series for Consumer Packaged Goods
 
Indus Solution Series for Public Sector
 
        Indus Software Solutions for Public Sector provide a set of business
applications which meet the needs of municipalities, public works
departments, school districts, universities, and other entities that
require robust enterprise and facilities management software to help
attract private funds, upgrade infrastructures, and provide services
where required.
 
Specific packaged solutions in this series include:
 
        Indus Solution Series for Municipalities
        Indus Solution Series for Higher Education
 
Product Architecture and Development Strategy for Indus Products
 
        Commercial Off-the-shelf Technology. The Company utilizes industry-
standard tools and technologies to develop its products, enabling
Software Solutions comprising this series to evolve along with rapidly
emerging standards and best business practices.  The Company's Products
are largely platform independent, running on industry-standard UNIX and
Windows NT servers including the IBM RS/6000, HP 9000, Sun SPARCstation
and Intel-based systems. The Company's architecture utilizes the
functionality of both Oracle and IBM's DB2 databases with both text-
based and graphical user interfaces.   Commencing with its latest
product releases, the Company provides versions of its client products
on the Internet, for both E-Commerce (Extranet) and internal (Intranet)
applications.  The Company's "next generation" clients also support a
Windows Explorer navigational ability, which can be accessed from the
native product client as well as the Internet.  The Company is also the
first EAM vendor to provide a suite of Mobile Computing modules to
support critical field and warehouse business practices.
 
        Partitioned Application Architecture. The layers of the Company's
application architecture-the user interface, business logic, data
storage, workflow and browser interface-are interoperable but not
interdependent and support an n-tier environment. For example, changes
to the database layer are not dependent on the user interface. The
partitioning built into the Company components minimize the Company's
dependence on third-party vendors and efficiently utilizes desktop
computers, "thin clients," servers and networks. The Company believes
this architecture reduces its exposure to the risks of technology or
market shifts that require changes in one or more of the layers, and
enables rapid exploitation of technology advances.
 
        Object-oriented Design and Third-party Interoperability. The Company
develops its products through an object-oriented design and development
methodology by which software "objects" (i.e., collections of
properties and methods) are used as building blocks to model real-world
business processes. Further, the Company's architecture is designed to
be an open system with Application Program Interfaces ("APIs") that
enable easy interoperability and extension at the application level. The
APIs are available to third party developers to facilitate the
integration of Indus Software Solutions with other client/server
applications.  The Company believes object-oriented development has
several benefits including software reusability, which results in
decreased development expense and improved software quality, and
component management, which allows customers to implement and upgrade
subsets of the application.
 
        Flexible Network Technology. The Company's applications can be
installed in a network configuration to enable customers to take full
advantage of client/server technology with low cost and low maintenance
"thin clients." Network-centric implementation is attractive to
clients concerned about the acquisition and systems management expense
associated with personal computers. The efficient network architecture
inherent in its Indus products is particularly important to clients with
low-bandwidth networks, prevalent in developing markets, which require
the minimization of network traffic to support advanced client/server
applications.
 
Implementation Methodology and Related Services
 
        Indus Software Solutions are implemented through the Company's
proprietary ABACUS tools and implementation methodology. ABACUS consists
of software-driven analytical tools, implementation plans and
educational resources that encapsulate the Company's extensive
experience in implementing enterprise management software solutions.
ABACUS provides a step-by-step implementation life cycle framework for
all installation, integration, and education and business review
activities. In addition, ABACUS enhances the ongoing effectiveness of
Indus Software Solutions and assists customers in improving their
business processes.
 
        ABACUS software tools use a time-sensitive and track-oriented
approach to help customers and the Company's business experts, technical
specialists and training professionals implement the Company's
applications. In addition to interactively identifying implementation
procedures, ABACUS contains over 575 "best practice" examples of how
such procedures were performed by other process industry companies,
drawn from the Company's extensive experience in implementing enterprise
asset management software solutions. The Company currently licenses
ABACUS software tools in conjunction with Indus Software Solutions which
includes the use of the ABACUS ToolKit, a version of the ABACUS software
that allows customers to tailor their internal project goals and
objectives with other corporate initiatives, modify implementation plans
and associated deliverables, supporting specific project/progress
reporting, etc. Versions of ABACUS products have been created to
effectively address the Company's entire product suite, as well as
implementation requirements and best practice selections of interest to
specific vertical industries.
 
A critical component of the ABACUS implementation is the partnership
between the software provider (the Company) and the customer.  At the
outset of the project, the Company assigns a Project Manager or Account
Executive to help ensure a successful, on-schedule implementation.
Throughout the implementation process, the Company's/Customer's team
defines and then executes a customer-specific, yet time-proven,
implementation process that focuses heavily on critical Business Process
Improvement (BPI) and Return on Investment (ROI) processes to drive
current and future customer success.  The Company has also developed
alliances with several of the "big five" firms as well as smaller
third party implementers and providers.  This ensures that customers
with specific requirements can leverage the value-added services of
these firms when implementing the Indus Solution Series.
 
Indus Solution Series Workbenches
 
        A series of best practice workbenches assist information engineers in
the development of business application systems and post-development
implementation support.  These workbenches include programming tools,
data services workbenches for data load and system interface exercises,
data migration tools, and archiving mechanisms. These productivity tools
help the Company demonstrate rapid development of high quality, highly
functional applications on predictable schedules and within established
budgets.  The Company also leverages critical third party components,
such as RDBMS, Network, and Operating system tools, to help customers
manage their software both during implementation and production.
 
        The Company also licenses Indus Solution Series Workbenches to
customers desiring the ability to modify business applications to suit
internal needs and to perform system administration and maintenance over
the application life cycle.
 
Customer Support, Software Maintenance and Training
 
        In addition to the standardized services offered through ABACUS, the
Company offers systems integration, customer support, software
maintenance and training through its regionally positioned professional
services capability. The Company provides systems integration and
customer support on a time and materials basis.  The Company provides
software maintenance for a fixed fee based on the number and types of
applications licensed.
 
        To help track and coordinate customer support and service
requirements, the Company has employed a service product marketed as
CareNet.  This customer care system, used throughout the global support
organization, provides the customer support team with a consistent
approach towards an interactive help desk, warranty support, and post-
implementation services which are widely used by its customers.
Experienced product specialists who have direct access to product
development teams and technology specialists' staff the help desk. A
computerized system is used to log, track, close, and analyze all
customer calls.
 
        Indus Education Services and Products, the Company's training
division, designs, manages, and implements comprehensive education and
training solutions for its user community. The Company's training and
technical professionals provide instructional design and courseware
development services, training coordination support, train-the-trainer
and end-user programs, and technical training for customer installations
worldwide. In addition, the Company has developed a comprehensive set of
training courseware to educate and train customers and internal staff.
Subjects covered by the courseware range from application product basics
to conducting business process reviews. Open enrollment training courses
are provided at the Company's training centers in San Francisco,
Atlanta, Dallas, Pittsburgh, and internationally in London, Paris and
Brisbane. In addition, training is also provided at customer sites at
the customer's option.  The Company also provides computer-based and
web-based training modules to provide additional value to customers who
desire these training needs.  Finally, the Indus Solution Series product
online help and wizards, including its CoPilot tool, help to guide the
new user through standard work processes by providing context-sensitive
assistance and pop-up screens.
 
Customers
 
        The Company provides enterprise management software solutions to
large process industry customers primarily in the energy industry,
continuous process industries, industrial manufacturing and the public
sector.  Segments within these capital-intensive markets include:
electric and gas utilities, telecommunications providers, petrochemical
refineries, mining and metals, forest products producers, consumer
packaged goods manufacturers, educational systems, and governmental
institutions.
 
        As of December 31, 1998, the Company products were licensed for use
by over 300,000 end-users representing 440 customers in 48 countries.
No single customer accounted for 10% or more of the Company's total
revenues in 1997 or 1998.
 
Sales and Marketing
 
        The corporate marketing function is organized into vertical business
areas, which comprise capital intensive facilities and process
industries targeted by the Company. By segmenting the market into
vertical business areas, the Company can package and deliver its
products and service offerings effectively to the industries it serves.
As discussed in the Indus Solution Series discussion earlier, these
markets and subsectors consist of the following:
 
<TABLE>
<CAPTION>
 
<S>
Energy/Communications
-------------------------------
Nuclear power generation
Conventional power generation
Energy delivery
Department of Energy
Telecommunications
 
<S>
Integrated Process Manufacturing
-------------------------------
Oil, Gas, and Chemical
Metals and Mining
Pulp and Paper
CPG
 
<S>
Public Sector
-------------------------------
Municipalities
Higher Education
 
</TABLE>
 
        The Company markets and sells its products and services in three
primary areas of the world: The Americas, with direct sales
representatives in the US, Canada, and Argentina; Europe, the Middle
East & Africa with direct sales representatives in the UK and France,
and Asia-Pacific with direct sales representatives in Australia and the
Philippines.  In addition to these direct marketing and sales
resources, the Company utilizes business partner relationships and
channel partner programs directly and indirectly in other parts of the
world. As of December 31, 1998, the Company's Sales and Marketing
organization consisted of 138 employees. The marketing staff is based
at the Company's corporate headquarters in San Francisco, while the
sales organization is decentralized throughout the three operational
centers.
 
        The direct sales cycle begins with the generation of a sales lead, or
the receipt of a request for proposal from a prospect, which is followed
by qualification of the lead, an analysis of the customer's needs,
response to a request for proposal, one or more presentations to the
customer utilizing the special knowledge of the industry vertical pre-
sales staff, customer internal sign-off activities, and contract
negotiation and finalization.  While the sales cycle varies depending on
the customer, the sales cycle generally requires three to nine months.
 
        In support of its sales force, the Company conducts comprehensive
industry-specific vertical marketing programs which include public
relations, trade advertising, industry seminars, trade shows and ongoing
customer communication programs through IndusWorld, the Company's
international user group. In addition, the Company's Account Manager
Program provides regional support and specialized attention for each of
its customers. Account Managers assist in implementing licensed
applications over multi-year engagements, promote licensing of
additional applications, and encourage existing customers to identify
and help fund new applications.
 
Strategic Relationships
 
        Through its alliance and channel partner programs, the Company
intends to continue to develop new products, to keep pace with the
latest technological developments, and to extend its marketing, sales
and support efforts by building synergy between the Company's products
and services and those available from complementary third party
providers. The Company has entered into strategic alliances and other
formal and informal relationships with major software and hardware
vendors and with consulting firms, service providers and systems
integrators. Members of the Company's Alliance and Partner programs
assist the Company with sales and support activities and with product
localization in foreign countries.
 
Indus Alliance Program
 
        The Indus Alliance Program is comprised of third party providers of
complementary software products, which interoperate with Indus Software
Solutions through integration products to provide additional license
revenues and services to the Company while delivering a broad suite of
enterprise-wide software capabilities.  Membership in this program
includes Oracle for corporate financial systems, PeopleSoft for
corporate financial, human resources and payroll systems, Nuclear Fuels
Services/Radiation Protection Systems for jointly developed Nuclear
Health Physics Systems marketed as Total Exposure, and Identitech
Corporation, maker of electronic document management and workflow
software. Other third party integration alliance partners are currently
under consideration by the Company.
 
Indus Partner Program
 
        The Indus Partner Program consists of three classes of third party
providers including: Indus Service Partners (foreign and domestic),
Indus Solution Series Platform Partners, and partners in the Indus
Extension Program.
 
        Indus Service Partners include third-party consultants and system
integration firms, which help deliver the services required to implement
Indus Software Solutions. These recognized firms add specialty knowledge
to assist in training and reengineering services, help provide staff
leveling and supply peak load project resources to the regional
operators. These resources assist in the delivery of ABACUS services on
an as-needed basis. Domestically, implementation partners include:
Arthur Andersen, PriceWaterhouseCoopers, Computer Science Corporation,
Deloitte & Touche Consulting Group, Solbourne Group, Cimcorp, and The
Application Group. International implementation partners include
Enidata, Euriware, Gulf Data International, Innova, Maxon Engineering
Services, Inc., Eagle Technologies, SGA Integrators and PosData.
 
        Indus Series Platform Partners are computer hardware providers and
operating system software providers that help the Company remain
technologically current with evolving releases of software and hardware
upgrades. Cooperative marketing, joint trade show participation, and
vendor fair participation at the the CompanyWORLD EXPO Annual Conference
of the User Group are extended to this cooperative group of vendors. The
Company participates in the Hewlett-Packard Channel Program, Digital
Equipment's Business Partner Program, the IBM Business Partner Program,
Sun MicroSystems Alliance Program, as well as Microsoft's Solution
Provider Program and Oracle's Cooperative Applications Initiative.
 
        The Indus Extension Program is comprised of third party vendors
offering products, which provide value-added product extensions or
specialty services, taking Indus Solution Series data beyond the
specified scope of the Company's application systems. Both specialty
hardware and specialty point solution software vendors are recognized in
this program which include offerings from: Harbinger Corporation
(Acquion, Inc.), Commerce One, Inc., Dolphin Software, DEI Group, Future
Horizons, Identitech, Inc., Intermat, Meridium Corporation, Primavera,
Sqribe Technologies Corporation, Tadcom, and Telxon Corporation. For the
Energy Delivery Industry, Energy Delivery integration is provided with
AM/FM/GIS solutions from Intergraph, SHL Vision and Smallworld
Corporation.
 
Research and Development
 
        The Company has a dedicated research and development and engineering
organization, and regularly releases new products and enhancements to
existing products. Research and development efforts are directed at
increasing product functionality, improving product performance, and
extending the capabilities of the products to interoperate with selected
third-party software products available from alliance partners such as
Oracle, PeopleSoft and others. These efforts include developing new
applications that address new horizontal and vertical functions, which
enhances the intellectual property content of the Company's offerings
and ensures that the products remain "best-of-class".
 
        The Company believes that research and development is most
effectively accomplished if customers are involved in the process.
Through direct customer involvement and consensus input from user group
oversight committees, InSight and InFocus, product content is improved
and the customer acceptance threshold usually associated with new
software deployment significantly lowered. In addition, the interactive
development process promotes increased customer awareness of the
technological features of the product and fosters greater product
loyalty.
 
        There can be no assurance that the Company will be successful in
developing and marketing product enhancements or new products that
respond to technological change; changes in customer requirements, or
emerging industry standards, that the Company will not experience
difficulties that could delay or prevent the successful development,
introduction or marketing of such products and enhancements; or that any
new products or enhancement that it may introduce will achieve market
acceptance. The inability of the Company, for technological or other
reasons, to develop and introduce new products or enhancements in a
timely manner in response to changing customer requirements,
technological change or emerging industry standards, would have a
material adverse effect on the Company's business or results of
operations.
 
        As of December 31, 1998, the Company had 311 employees engaged in
research and development. The Company's research and development
expenses were approximately $23.3 million, $27.7 million, and $30.4
million in 1996, 1997 and 1998 respectively. Development costs funded by
customers as part of license and service contracts are included as part
of cost of revenues.
 
Competition
 
        The enterprise asset management software solutions market is highly
competitive, rapidly changing and significantly affected by new product
introductions and other market activities of industry participants. The
Company's primary competition stems from companies offering enterprise
asset software solutions, vendors offering partial solutions and
suppliers of departmental systems (primarily LAN-based). The Company's
competitors include SAP, the Company's principal competitor, and other
software vendors such as Mincom, PSDI, Marcam, and Datastream. In the
future, the Company may face competition from its Alliance Partners.  In
the electric utility market, the Company faces competition from
suppliers of energy delivery point applications, including Severn Trent
and Logica.
 
        In addition, the Company faces indirect competition from suppliers of
custom-developed business applications software that have focused
largely on proprietary mainframe and minicomputer-based systems with
highly customized software, such as the systems consulting groups of
major accounting firms and systems integrators. The Company also faces
indirect competition from systems developed by the internal MIS
departments of large organizations.
 
        Many of the Company's competitors and potential competitors have
longer operating histories, significantly greater financial, technical,
marketing and other resources, greater name recognition, and a larger
installed base of customers than the Company. In addition, certain
competitors, including SAP, have well-established relationships with
customers of the Company and with accounting and consulting firms that
may have an incentive to recommend such competitors over the Company.
Furthermore, as the enterprise management software solutions market for
process industries expands, companies with significantly greater
resources than the Company could attempt to increase their presence in
this market by acquiring or forming strategic alliances with competitors
of the Company.
 
        The principal competitive factors affecting the market for the
Company's software products are responsiveness to the needs of capital
intensive industries, product functionality and ease of use, speed of
implementation, product architecture, quality and reliability, vendor
and product reputation, quality of customer support and price. Based on
these factors, the Company believes that it has competed effectively to
date. In order to be successful in the future, the Company must continue
to respond promptly and effectively to the challenges of technological
change and its competitors' innovations by continually enhancing its own
product offerings. There can be no assurance, however, that the
Company's products will continue to compete favorably or that the
Company will be successful in the face of increasing competition from
new products and enhancements introduced by existing competitors or new
companies entering this market.
 
Proprietary Rights and Licensing
 
        The Company relies on a combination of the protections provided under
applicable copyright, trademark and trade secret laws, as well as on
confidentiality procedures and licensing arrangements to establish and
protect its rights in its software. Despite the Company's efforts, it
may be possible for unauthorized third parties to copy certain portions
of the Company's products or to reverse engineer or obtain and use
information that the Company regards as proprietary. In addition, the
laws of certain countries do not protect the Company's proprietary
rights to the same extent, as do the laws of the United States.
Furthermore, the Company has no patents, and existing copyright laws
afford only limited protection. Accordingly, there can be no assurance
that the Company will be able to protect its proprietary software
against unauthorized third party copying or use, which could adversely
affect the Company's competitive position.
 
        The Company licenses its applications to customers under license
agreements, which are generally in standard form, although each license
is individually negotiated and may contain variations. The standard form
agreement allows the customer to use the Company's products solely on
the customer's computer equipment for the customer's internal purposes,
and the customer is generally prohibited from sub-licensing or
transferring the applications. The agreements generally provide that the
Company's warranty for its products is limited to correction or
replacement of the affected product, and in most cases the Company's
warranty liability may not exceed the licensing fees from the customer.
The Company's form agreement also includes a confidentiality clause
protecting proprietary information relating to the licensed
applications.
 
        The Company's products are generally provided to customers in object
code (machine-readable) format only. From time to time, in limited
circumstances, the Company has licensed source code (human-readable
form) subject to customary protections such as use restrictions and
confidentiality agreements. In addition, customers can be beneficiaries
of a master source code escrow for the applications, pursuant to which
the source code will be released to end users upon the occurrence of
certain events, such as the commencement of bankruptcy or insolvency
proceedings by or against the Company, or certain material breaches of
the agreement. The Company has the right to object to the release of the
source code in such circumstances, and to submit the matter to dispute
resolution procedures. In the event of any release of the source code
from escrow, the customer's license is limited to use of the source code
to maintain, support and configure the Company applications.
 
        The Company may from time to time receive notices from third parties
claiming infringement by the Company's products of proprietary rights of
others. As the number of software products in the industry increases and
the functionality of these products further overlap, the Company
believes that software developers may become increasingly subject to
infringement claims. Any such claims, with or without merit, can be time
consuming and expensive to defend or could require the Company to enter
into royalty and licensing agreements. Such agreements, if required, may
not be available on terms acceptable to the Company, or at all.
 
Employees
 
        As of December 31, 1998, the Company employed 1,037 people, of which
311 were primarily engaged in research and development activities, 494
in post-sales support and customer project operations, 138 in sales and
marketing, and 94 in administration and finance. None of the Company's
employees is represented by a labor union. The Company has experienced
no work stoppages and believes that its relationship with its employees
is excellent.
 
        The Company's future success depends, in large part, on the
continued service of its key management, sales, product development and
operational personnel and on its ability to attract and retain highly
qualified employees, including management personnel. There can be no
assurance that the Company will be successful in attracting, retaining
and motivating key personnel.
 
Executive Officers
 
        The executive officers of the Company as of December 31, 1998 were as
follows:
 
<TABLE>
<CAPTION>
     Name of Nominee        Age              Principal Occupation
-------------------------  -----  ------------------------------------------
<S>                        <C>    <C>
Robert W. Felton.......      60   Chief Executive Officer and Chairman of the
                                  Board
 
William J. Grabske ....      56   President and Chief Operating Officer
 
Kerry P. Lamson .......      47   Senior Vice President of Worldwide Marketing
 
Philip C. Mezey .......      39   Senior Vice President of Development
 
Robert A. Pocsik ......      57   Senior Vice President of Human Resources
                                  and Administration
 
C. Jeffrey Simpson ....      49   Executive Vice President of Worldwide Sales
 
Albert J. Wood ........      42   Vice President of Finance and Treasurer
 
</TABLE>
 
----------------
 
A biography, including the principal occupations for the past five
years of each of the executive officers, is provided below.  There is no
family relationship between any executive officer of the Company.
 
Mr. Felton is a founder of The Indus Group, Inc. and has been on the
Board of Directors since the consummation of the Merger on August 25,
1997.  He served as Chairman of the Board until March 17, 1999.  He
also served as Chief Executive Officer of the Company until December
31, 1998.  From 1988 until August 25, 1997, he was the Chairman,
President and Chief Executive Officer of The Indus Group, Inc.
 
        Mr. Grabske was elected as Chief Executive Officer and director of
the Company on January 1, 1999.  He was also elected as Chairman of the
Board of Directors on March 17, 1999.  He has served as President since
June 15, 1998.  From June 15, 1998 until December 31, 1998, he served
as Chief Operating Officer of the Company.  From September 1995 to June
1998, Mr. Grabske was President of the Utilities Industry at EDS, a
technical services company.  From August 1990 to August 1995, Mr.
Grabske was Senior Vice President a Managing Director of JWP
International, a technical services company.
 
        Mr. Lamson has served as Senior Vice President of Worldwide
Marketing of the Company since May 1998.  From March 1996 to April
1998, Mr. Lamson was Vice President of Applications Product Marketing
for Oracle Corporation, an information management software company.
From January 1993 to March 1996, Mr. Lamson was Director of Electronic
Commerce and Integration Products for Systems Software Associates, an
enterprise application software company.
 
        Mr. Mezey has served as Senior Vice President of Development of the
Company since July 1998.  Prior to July 1998, he was Vice-President of
Development of the Company since the consummation of the Merger on
August 25, 1997.  From January 1991 to August 25, 1997, he was the Vice
President of Development of The Indus Group, Inc.
 
        Mr. Pocsik has served as Senior Vice President of Human Resources
and Administration since October 1998.  From January 1997 to June 1998,
he served as Managing Director of Imcor, an executive development and
search firm.  From December 1992 to December 1997, he was President and
Chief Executive officer of Haden Wegman, an engineering infra-structure
firm.
 
        Mr. Simpson became a consultant to the Chief Executive Officer on
January 1, 1999 and left the Company March 1999.  Mr. Simpson served as
Executive Vice President of Worldwide Sales since May 1998.  From July
1996 to May 1998, he invested in and consulted in several startup
software companies in Atlanta.  Prior to July 1996, he served as Field
Vice President of the Communications Industry at Oracle Corporation, an
information management software company.
 
        Mr. Wood has served as Vice President of Finance and Treasurer since
December 1997.  From September 1996 to September 1997, Mr. Wood was
Controller for Prism Solutions, a software and consulting services
company.  From November 1993 to September 1996, Mr. Wood was Director
of Finance/Treasurer and Sales Controller for Pyramid Technology, a
computer manufacturing and consulting services company.
 
Risk Factors
 
        This report contains forward-looking statements that involve risks
and uncertainties.  Forward-looking statements have been made pursuant
to the provisions of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities and Exchange Act of 1934, including
without limitation statements regarding the Company's expectations,
beliefs, intentions, plans or strategies regarding the future. Unless
required by law, the Company assumes no obligation to update any such
forward-looking statements.  The Company's actual results could differ
materially from those anticipated in these forward-looking statements as
a result of certain factors, including those set forth below and
elsewhere in this report.
 
Volatility of Operating Results
 
        Fluctuating Operating Results. The Company's operating results have
fluctuated in the past, and the Company's results may fluctuate
significantly in the future depending on a number of factors, including
(i) the relatively long sales cycles for its products, (ii) the variable
size and timing of individual license transactions, (iii) changes in
demand for their products and services, (iv) competitive conditions in
the industry, (v) changes in customer budgets, (vi) the timing of the
introduction of new products or product enhancements by each such
company or its competitors, (vii) their success in and costs associated
with developing and introducing new products, (viii) product life
cycles, (ix) variability in new licenses obtained, (x) changes in the
proportion of revenues attributable to license fees versus services,
(xi) changes in the level of operating expenses, (xii) delay or deferral
of customer implementations of their software, (xiii) software defects
and other product quality problems, and (xiv) other economic conditions
generally or in specific process industry segments. Further, the
purchase of the Company's products generally involves a significant
commitment of capital, with the attendant delays frequently associated
with large capital expenditures and authorization procedures within
large organizations. For these and other reasons, the sales cycles for
the Company's products are typically lengthy and subject to a number of
significant risks over which each such company has little or no control,
including customers' budget constraints and internal authorization
reviews. In addition, delays in the completion of a product
implementation may require that the revenues associated with such
implementation be recognized over a longer period than originally
anticipated. Such delays in the implementation or execution of orders
have caused, and may in the future cause, material fluctuations in the
Company's operating results. Similarly, customers may cancel
implementation projects at any time without penalty, and such
cancellations could have a material adverse effect on the Company's
business or results of operations. Because the Company's expenses are
relatively fixed, a small variation in the timing of recognition of
specific revenues can cause significant variations in operating results
from quarter to quarter and may in some future quarter result in losses
or have a material adverse effect on the Company's business or results
of operations.
 
        Additional factors that may contribute to future fluctuations in the
Company's quarterly operating results include, but are not limited to:
(i) development and introduction of new operating systems that require
additional development efforts; (ii) introduction or enhancement of
products by the Company or its competitors; (iii) changes in pricing
policies of the Company or its competitors; (iv) increased competition;
(v) technological changes in computer systems and environments; (vi) the
ability of the Company to timely develop, introduce and market new
products; (vii) quality control of products sold; (viii) market
acceptance of new products and product enhancements; (ix) the Company's
success in expanding its sales and marketing programs; (x) personnel
changes; (xi) foreign currency exchange rates; (xii) mix of products
sold; (xiii) acquisition costs; and (xiv) general economic conditions.
 
Management of Growth; Dependence on Key Personnel
 
        The Company's business has grown rapidly in recent periods, with
total revenues increasing from $143.0 million in 1996 to $177.0 million
in 1997 and $195.5 million in 1998. The growth of the Company's business
and expansion of customer base has placed a strain on management and
operations. The recent expansion has also resulted in substantial growth
in the number of its employees, the scope of its operating and financial
systems and the geographic area of its operations, resulting in
increased responsibility for management personnel.
 
        In the future, the Company will be required to continue to improve
its financial and management controls, reporting systems and procedures
on a timely basis and to expand, train and manage its employee work
force. There can be no assurance that the Company will be able to
effectively manage such growth. Our failure to do so would have a
material adverse effect on its business, operating results and financial
condition. Competition for qualified sales, technical and other
personnel is intense, and there can be no assurance that the Company
will be able to attract, assimilate or retain additional highly
qualified employees in the future. If the Company were unable to hire
and retain such personnel, particularly those in key positions, its
business, operating results and financial condition would be materially
adversely affected. The Company's future success also depends in
significant part upon the continued service of its key technical, sales
and senior management personnel. The loss of the services of one or more
of this key employees could have a material adverse effect on its
business, operating results and financial condition. Additions of new
and departures of existing personnel, particularly in key positions, can
be disruptive and have a material adverse effect on the Company's
business, operating results and financial condition.
 
Intense Competition
 
        The enterprise asset management software solutions business is
highly competitive, rapidly changing and significantly affected by new
product introductions and other market activities of industry
participants.  The Company's primary competition stems from companies
offering enterprise software solutions, vendors offering partial
solutions and suppliers of departmental systems (primarily LAN-based).
The Company's competitors include SAP, and other software vendors such
as Mincom Corp., Project Software & Development, Inc.and DataStream,
Inc., firms that provide software products to electric utilities such as
Severn Trent Systems and Synercom, and many other firms. In the future,
the Company may also face competition from Oracle, PeopleSoft and SPL
WorldGroup B.V., through which it is developing PassBook integration
products to provide interoperability with Oracle's corporate financial
applications and PeopleSoft's corporate financial, payroll and human
resources applications. In addition, the Company faces competition from
suppliers of custom-developed business application software that have
focused largely on proprietary mainframe- and microcomputer-based
systems with highly customized software, such as the systems consulting
groups of major accounting firms and systems integrators. The Company
also faces competition from systems developed by the internal MIS
departments of large organizations.
 
        The businesses in which the Company competes are intensely
competitive and rapidly changing and, in order to compete, the Company
will have to enhance current products and develop new products in a
timely fashion. Management believes that the principal competitive
factors in the Company's businesses will be product performance and
functionality, cost of internal product development as compared with
cost of purchase of products supplied by outside vendors, cost of on-
going maintenance and time-to-market. Many of the Company's competitors
will have substantially greater financial, technical, sales, marketing
and other resources, as well as greater name recognition and a larger
customer base, than the Company. The Company's success will also depend
significantly on its ability to develop more advanced products more
quickly and less expensively than its existing competitors and potential
competitors and to educate potential customers of the benefits of
licensing the Company's products rather than developing their own
products. The Company's current and future competitors could introduce
products with more features, greater functionality and lower prices than
the Company's products. These competitors could also bundle existing or
new products with other, more established products in order to compete
with the Company. In addition, because there are relatively low barriers
to entry for the software market, the Company expects additional
competition from other established and emerging companies. Increased
competition is likely to result in price reductions, reduced gross
margins and loss of sales volume, any of which could materially and
adversely affect the Company's business, operating results and financial
condition. Any material reduction in the price of the Company's products
would negatively affect its gross revenues and could have a material
adverse effect on its business, operating results and financial
condition. There can be no assurance that the Company will be able to
compete successfully against current and future competitors, and the
failure to do so would have a material adverse effect upon the Company's
business, operating results and financial condition.
 
Rapid Technological Change; Need to Develop New Products; Requirement
for Frequent Product Transitions
 
        The industries in which the Company participates are intensely
competitive and characterized by rapid technological change, evolving
industry standards in computer hardware and software technology changes
in customer requirements and frequent new product introductions and
enhancements. The introduction of products embodying new technologies,
the emergence of new standards or changes in customer requirements could
render the Company's existing products obsolete and unmarketable. As a
result, the Company's success will depend in part upon its ability to
continue to enhance existing products and expand its products, continue
to provide enterprise solutions and develop and introduce new products
that keep pace with technological developments, satisfy increasingly
sophisticated customer requirements and achieve customer acceptance.
Customer requirements include, but are not limited to, product
operability and support across distributed and changing heterogeneous
hardware platforms, operating systems, relational databases and
networks. There can be no assurance that the Company's products will
achieve customer acceptance or will adequately address the changing
needs of the marketplace or that the Company will be successful in
developing and marketing enhancements to its existing products or new
products incorporating new technology on a timely basis. The Company has
in the past experienced delays in product development, and there can be
no assurance that the Company will not experience further delays in
connection with its current product development or future development
activities. If the Company is unable to develop and introduce new
products, or enhancements to existing products, in a timely manner in
response to changing market conditions or customer requirements, the
Company's business, operating results and financial condition will be
materially and adversely affected. Because the Company has limited
resources, the Company must effectively manage and properly allocate and
prioritize its product development efforts and its porting efforts
relating to newer products and operating systems. There can be no
assurance that these efforts will be successful or, even if successful,
that any resulting products or operating systems will achieve customer
acceptance.
 
International Operations
 
         International revenue (from sales outside the United States, Canada
and Mexico) accounted for approximately 20%, 14% and 13% of total
revenues in 1996, 1997 and 1998, respectively. The Company maintains an
operational presence in the United Kingdom and France.  In addition, the
Company has established sales and support offices in Europe and
Australia; and expects international sales to continue to become a more
significant component of its business.   International expansion may
require the Company to establish additional foreign operations and hire
additional personnel. This may require significant management attention
and financial resources and could adversely affect the Company's
operating margin.  To the extent the Company is unable to effect these
additions efficiently and in a timely manner, its growth, if any, in
international sales will be limited, and its business, operating results
and financial condition could be materially and adversely affected.
There can be no assurance that the Company will be able to maintain or
increase international market demand for its products.
 
        The Company's international business will also involve a number of
additional risks, including lack of acceptance of localized products,
cultural differences in the conduct of business, longer accounts
receivable payment cycles, greater difficulty in accounts receivable
collection, seasonality due to the slow-down in European business
activity during the Company's third fiscal quarter, unexpected changes
in regulatory requirements and royalty and withholding taxes that
restrict the repatriation of earnings, tariffs and other trade barriers,
and the burden of complying with a wide variety of foreign laws. The
Company's international sales will be generated primarily through its
international sales subsidiaries and indirect sales channel partners and
are expected to be denominated in local currency, creating a risk of
foreign currency translation gains and losses. To the extent profit is
generated or losses are incurred in foreign countries, the Company's
effective income tax rate may be materially and adversely affected.  In
some markets, localization of the Company's products will be essential
to achieve market penetration. The Company may incur substantial costs
and experience delays in localizing its products, and there can be no
assurance that any localized product will ever generate significant
revenue. There can be no assurance that any of the factors described
herein will not have a material adverse effect on the Company's future
international sales and operations and, consequently, its business,
operating results and financial condition.
 
        Recent economic trends, particularly in the Asia-Pacific
marketplace, have caused a heightened awareness of the impact this
portion of the world's economy can have on the overall economy.  As the
Asia-Pacific market currently represents almost one-third of the world's
buying power and approximately 3% of the Company's revenues are to this
region, changes in this area's economic growth rate may impact suppliers
of product into that market.  While the actual magnitude of the business
at risk is unknown, it is likely that capital spending in this market
will decrease and thus, the Company's ability to increase revenues in
this region may be negatively impacted.
 
Dependence on Proprietary Technology; Risks of Infringement
 
        The Company's success is heavily dependent upon its proprietary
technology. The Company will rely on a combination of the protections
provided under applicable copyright, trademark and trade secret laws,
confidentiality procedures and licensing arrangements, to establish and
protect its proprietary rights. As part of its confidentiality
procedures, the Company will generally enter into non-disclosure
agreements with its employees, distributors and corporate partners, and
license agreements with respect to its software, documentation and other
proprietary information. Despite these precautions, it may be possible
for unauthorized third parties to copy certain portions of the Company's
products or to reverse engineer or obtain and use information that the
Company regards as proprietary the Company's products or technology
without authorization, or to develop similar technology independently.
Moreover, the laws of certain countries do not protect the Company's
proprietary rights to the same extent, as do the laws of the United
States. Furthermore, the Company has no patents, and existing copyright
laws afford only limited protection. The Company will make source code
available for certain of its products and the provision of such source
code may increase the likelihood of misappropriation or other misuses of
the Company's intellectual property. Accordingly, there can be no
assurance that the Company will be able to protect its proprietary
software against unauthorized third party copying or use, which could
adversely affect the Company's competitive position.
 
        The Company is not aware that any of its products infringe the
proprietary rights of third parties. There can be no assurance that a
third party will not assert that the Company's technology violates its
patents in the future. As the number of software products in the
industry increases and the functionality of these products further
overlap, the Company believes that software developers may become
increasingly subject to infringement claims. Any such claims, with or
without merit, can be time consuming and expensive to defend or could
require the Company to enter into royalty and licensing agreements. Such
claims might require the Company to enter into royalty or license
agreements. Such royalty or license agreements, if required, may not be
available on terms acceptable to the Company or at all, which could have
a material adverse effect upon the Company's business, operating results
and financial condition.
 
Lengthy Sales and Implementation Cycle; Large Order Size
 
        The purchase and implementation of the Company's software solutions
by a customer will generally involve a significant commitment of capital
over a long period of time, with the risk of delays frequently
associated with large capital expenditures and implementation procedures
within an organization, such as budgetary constraints and internal
approval review. During the sales process, the Company may devote
significant time and resources to a prospective customer, including
costs associated with multiple site visits, product demonstrations and
feasibility studies, and experience significant delays over which the
Company will have no control. In addition, following license sales, the
implementation of the Company's products will involve a lengthy process,
including customer training and consultation.  A successful
implementation will require a close working relationship between the
Company, the customer and, if applicable, third party consultants and
systems integrators who assist in the process. These factors may
increase the costs associated with completion of any given sale, and
risks of cancellation or delay of such sales.
 
Dependence on Licensed Technology
 
        Elements of the Company's products, particularly in its EMPAC
workflow engine, are licensed from third parties under license
agreements. The loss of the Company's right to use and license such
technology could limit the Company's ability to successfully market
certain modules of EMPAC. While the Company believes that the it would
be able to either license or develop alternatives to such component
technologies, there can be no assurance that the Company would be able
to do so, or that such alternatives would achieve market acceptance or
be available on a timely basis. Failure to obtain the necessary licenses
or to develop needed technologies could have a material adverse effect
on the Company's business, operating results and financial condition.
 
Dependence on Third Parties
 
        Implementation and development of EMPAC software depends on
proprietary technology licensed from third parties. Implementation of
EMPAC requires the use of the Windows environment licensed from
Microsoft Corporation. The introduction and increased market acceptance
of operating systems that are incompatible with the Company's products,
or the failure of Microsoft's operating systems to achieve continued
market acceptance, could adversely affect the market for the Company's
products. EMPAC also relies on certain proprietary features of the
database management system developed by Oracle. The introduction and
increased market acceptance of database management systems that are
incompatible with the Company's products, or the failure of Oracle
products to achieve continued market acceptance, could adversely affect
the market for the Company's products. In addition, certain elements of
EMPAC have been developed in PowerBuilder, a client/server development
product that has been traditionally database independent. Sybase, Inc.
acquired Powersoft Corporation, which licenses PowerBuilder, in 1994.
If PowerBuilder does not continue to be database independent, future
development of the Company's Windows-based components which operate in
conjunction with the Oracle database management system may be adversely
affected. Although the Company's strategy has been to develop software
products that are minimally dependent on any particular element of the
underlying platform, there can be no assurance that the Company will be
able to avoid the obsolescence of its products due to rapid
technological change and evolving industry standards.
 
Risk of Software Defects; Product Liability
 
        The sale and support of the Company's products may entail the risk
of product liability claims. The license agreements of the Company
typically contain provisions designed to limit exposure to potential
product liability claims. It is possible, however, that the limitation
of liability provisions contained in such license agreements may not be
effective as a result of federal, state or local laws or ordinances or
unfavorable judicial decisions. A successful product liability claim
brought against the Company could have a material adverse effect upon
the Company's business, operating results and financial condition.
 
Past and Future Acquisitions.
 
        The Company, as well as its predecessor corporations, The Indus
Group, Inc. and TSW International, Inc. has made acquisitions in the
past. Acquisitions of companies, divisions of companies or products
entail numerous risks, including difficulty in successfully assimilating
acquired operations, diversion of management's attention and loss of key
employees of acquired companies. In 1997, The Indus Group, Inc.
completed two acquisitions. In 1994 and 1995, TSW International, Inc.
concluded a total of three acquisitions of companies, divisions of
companies or products. The Company may make additional acquisitions in
the future. Products acquired by The Indus Group, Inc. and TSW
International, Inc. in the past required significant additional
development before they could be marketed and some failed to generate
any revenue for The Indus Group, Inc. or TSW International, Inc. Any
problems related to acquisitions could have a material adverse effect on
the Company's business, operating results and financial condition. In
addition, future acquisitions by the Company may result in dilutive
issuance of equity securities, incurring additional debt, large one-time
write-offs and the creation of goodwill or other intangible assets that
could result in amortization expense. These factors could have a
material adverse effect on the Company's business, operating results and
financial condition.
 
ITEM 2.  PROPERTIES
 
     Certain  information  concerning the Company's office space at December 31,
1998 is set forth below:
<TABLE>
<CAPTION>
               Location                          Principal use             Footage   Ownership
--------------------------------------  --------------------------------  ---------  ---------
<S>                                     <C>                               <C>        <C>
Domestic Offices:
   Atlanta, GA......................    Regional Headquarters, Research    105,654     Lease
                                        and Development, Sales and
                                        Marketing, Operations
   San Francisco, CA................    Corporate Headquarters, Research    79,513     Lease
                                        and Development, Sales and
                                        Marketing, Operations
   Pittsburgh, PA...................    Regional Operations                 28,261     Lease
   Dallas, TX.......................    Regional Operations                  9,041     Lease
   Lake Oswego, OR..................    Regional Operations                  5,507     Lease
   Malvern, PA......................    Regional Operations                  4,075     Lease
   Other executive offices..........    Sales                                1,975     Lease
 
International Offices:
   Woking, Surrey, United Kingdom...    Regional Operations                  9,300     Lease
   Brisbane, Australia..............    Regional Operations                  6,695     Lease
   Paris, France.....................   Regional Operations                  6,660     Lease
   Chertsey, Surrey, United Kingdom.    Regional Operations                  5,500     Lease
   Toronto, Canada..................    Regional Operations                  2,180     Lease
   Executive offices in Australia       Sales                                  650     Lease
</TABLE>
 
        In the third and fourth quarter of 1998, the Company entered into
additional lease agreements for additional office space, in Canada and
San Francisco of 2,180 and 12,835 square feet, respectively.  Management
is currently and will continue to evaluate additional leased facilities
to accommodate the anticipated growth in operations for 1999. The
Company owns substantially all of the equipment used in its facilities.
 
ITEM 3.  LEGAL PROCEEDINGS
 
        From time to time, the Company is involved in legal proceedings
incidental to the conduct of its business. While the outcome of these
claims cannot be predicted with certainty, the Company does not believe
that the litigation, individually or in the aggregate, to which it is
currently a party is likely to have a material adverse effect on the
results of operations or financial condition.
 
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
        No matters were submitted to a vote of security holders during the
fourth quarter of fiscal year 1998.
 
 
PART II
 
 
ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
 
        The Company's common stock, $.001 par value, is traded on the Nasdaq
National Market under the symbol "IINT".  The table sets forth the
high and low closing prices of the Company's common stock for the
periods indicated.  Information included in the table for the periods
prior to the consummation of the Merger on August 25, 1997 reflect the
stock prices of the common stock of The Indus Group, Inc., the Company's
predecessor issuer, which was traded on the Nasdaq National Market under
the symbol "IGRP" commencing on February 29, 1996, the date of its
initial public offering.
 
                                                       High       Low
                                                     --------- ---------
Fiscal 1997:
 First quarter....................................   $ 25-3/4  $ 14
 Second quarter...................................     20-1/4    13-1/2
 Third quarter....................................     19-3/4    15-3/8
 Fourth quarter...................................     17-3/4     6-1/2
 
Fiscal 1998:
 First quarter....................................   $ 10-1/2  $ 7
 Second quarter...................................     12        8
 Third quarter....................................     11-1/2    4-7/8
 Fourth quarter...................................     7          3
 
     The  Company  anticipates  that any future  earnings  will be  retained  to
finance the continuing development of its business. The Company has not declared
or paid any cash  dividends on its Common Stock and does not  anticipate  paying
cash dividends in the foreseeable future.
 
     The number of stockholders  of record for the Company's  common stock as of
March 10, 1999 was 375.
 
 
ITEM 6.  SELECTED FINANCIAL INFORMATION
 
        The following selected financial information of the Company is
qualified by reference to and should be read in conjunction with the
consolidated financial statements and notes thereto and other financial
information included elsewhere herein.  During 1997, The Indus Group,
Inc. entered into an Agreement and Plan of Merger and Reorganization
with TSW International, Inc.  The merger was consummated on August 25,
1997 and was accounted for as a pooling of interests.  All financial
information was restated to reflect the combined operations of The Indus
Group, Inc. and TSW International, Inc. The summary consolidated
statements of operations data for the years ended December 31, 1996,
1997, and 1998 and summary consolidated balance sheet data as of
December 31, 1997 and 1998 are derived from and qualified by reference
to the audited financial statements of the Company which are included
elsewhere herein. The summary consolidated balance sheet data as of
December 31, 1994, 1995 and 1996 and the summary consolidated statement
of operations for the years ended December 31, 1994 and 1995 are derived
from the audited financial statements of the Company which are not
included herein.
 
                               INDUS INTERNATIONAL, INC.
                         SUMMARY CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
                                                                     Years Ended December 31,
                                                     --------------------------------------- ---------
                                                       1994      1995      1996      1997      1998
                                                     --------- --------- --------- --------- ---------
                                                          (in thousands, except per share data)
<S>                                                  <C>       <C>       <C>       <C>       <C>
Statement of operations data:
Revenues:
   Software licensing fees (1) (2) .................  $15,380   $32,816   $43,060   $55,958   $55,546
   Services and maintenance ........................   41,901    67,824    97,515   119,382   138,956
   Other revenue ...................................      824     1,184     2,463     1,694       975
                                                     --------- --------- --------- --------- ---------
     Total revenues ................................   58,105   101,824   143,038   177,034   195,477
Cost of revenues ...................................   27,664    47,872    63,738    78,575   103,517
                                                     --------- --------- --------- --------- ---------
Gross margin .......................................   30,441    53,952    79,300    98,459    91,960
                                                     --------- --------- --------- --------- ---------
Operating expenses:
   Research and  development .......................   19,063    18,151    23,265    27,664    30,372
   Sales and marketing .............................   13,084    19,915    26,523    33,568    31,517
   General and administrative ......................   10,352    12,996    14,951    14,991    15,270
   Compensation charge-stock options (3) ...........      --     18,900       --       --         --
   Merger and restructuring expenses(4) ............      --        --        --     12,083       --
                                                     --------- --------- --------- --------- ---------
     Total operating expenses ......................   42,499    69,962    64,739    88,306    77,159
                                                     --------- --------- --------- --------- ---------
Income (loss) from operations ......................  (12,058)  (16,010)   14,561    10,153    14,801
Other income (expense) net .........................     (783)   (2,112)   (1,887)   (1,968)     (936)
                                                     --------- --------- --------- --------- ---------
Income (loss) before taxes .........................  (12,841)  (18,122)   12,674     8,185    13,865
Provision (benefit) for income taxes ...............   (1,195)      423     6,849     6,408       450
Cumulative effect of deferred income taxes
provided upon conversion by Indus to C
Corporation(5) .....................................      --        --      6,700       --        --
                                                     --------- --------- --------- --------- ---------
Income (loss) before extraordinary item ............  (11,646)  (18,545)     (875)    1,777    13,415
Extraordinary item .................................      --        --        --       (787)      --
                                                     --------- --------- --------- --------- ---------
Net Income (loss) .................................. ($11,646) ($18,545)    ($875)     $990   $13,415
                                                     ========= ========= ========= ========= =========
Pro forma statement of operations as adjusted:
   Income (loss) before income taxes ...............           ($18,122)  $12,674
   Add back portion of compensation charge-stock
   options (3) .....................................             17,900       --
                                                               --------- ---------
   Income (loss) before  income taxes, as adjusted .               (222)   12,674
   Provision for income taxes (federal, state
   and foreign) (5) ................................              5,181     6,849
                                                               --------- ---------
   Pro forma net income (loss) .....................            ($5,403)   $5,825
                                                               ========= =========
Income (loss) per share (computed on pro forma
net income (loss) in 1995 and 1996) - basic (7) ....             ($0.25)    $0.22     $0.03     $0.44
                                                               ========= ========= ========= =========
Shares used in computing per share data ............             22,027    25,976    28,574    30,717
                                                               ========= ========= ========= =========
</TABLE>
 
<TABLE>
<CAPTION>
                                                                          December 31,
                                                     --------------------------------------- ---------
                                                       1994      1995      1996      1997      1998
                                                     --------- --------- --------- --------- ---------
                                                                        (in thousands)
<S>                                                  <C>       <C>       <C>       <C>       <C>
Balance sheet data:
Working capital ..................................       $226     ($291)  $43,064   $37,238   $58,609
Total assets .....................................     39,857    57,734   117,855   136,725   150,785
Short-term debt ..................................      4,496    16,481    16,951    29,054    21,005
Long-term debt ...................................        665     1,222     2,126     1,105       257
Subordinated long-term notes .....................      9,650    16,251    18,065      --        --
TSW redeemable preferred stock ...................     11,100    13,100    18,100      --        --
Total stockholder's equity .......................    (11,846)  (20,473)   20,666    70,230    86,075
 
<FN>
(1)  Effective  in the third  quarter of 1997,  Indus  International, Inc. began
     to report applicable  new license fees on  standard software  products  not
     requiring substantial  modification or customization as earned revenue upon
     shipment to customers.  Previously,  because  substantial  modification and
     customization  of software  products was expected by  customers,  The Indus
     Group,  Inc.  had  deferred  the  applicable  license  fees  initially  and
     recognized   those  fees  as  earned  over  the  period  of   modification,
     customization and other installation  services.  TSW  International,  Inc.,
     which had not been required to perform substantial  customization services,
     continued to  recognize  the  applicable  portion of license fees as earned
     upon shipment of standard software products to customers.
(2)  TSW International, Inc. began recognizing license fee revenue from EMPAC in
     the quarter ended December 31, 1995, when EMPAC first became operational at
     a customer site.
(3)  Reflects  nonrecurring  expense  incurred  in the third  quarter of 1995 in
     connection with an amendment to The Indus Group, Inc.1992 Stock Option Plan
     to accelerate the exercisability  of outstanding  stock  options, which had
     previously been  contingent upon the occurrence of certain events.  The pro
     forma adjustment of $17,900,000 is to reduce 1995  compensation  expense to
     the amount  related to options  granted in 1995 only.
(4)  See Note 1 of the Notes to the  Consolidated  Financial  Statements  for an
     explanation of the merger and restructuring expenses.
(5)  Prior to January 1, 1996, The Indus Group,  Inc. was not subject to federal
     corporate  income  taxation  because of its  election to be taxed under the
     provisions of  Subchapter S of the Code.  Pro forma net income for 1995 has
     been  determined  by  assuming  that  the  Company  had  been  taxed as a C
     Corporation   for  1995.  Pro  forma  net  income  for  1996  reflects  the
     elimination of a nonrecurring  charge for the cumulative effect of deferred
     income taxes  incurred in the first quarter of 1996 in connection  with the
     termination  of The Indus Group's S Corporation  status.  See Note 1 to the
     Consolidated Financial Statements.
(6)  There were no material  transactions  between The Indus Group, Inc. and TSW
     International,  Inc. prior to the  consummation of the merger on August 25,
     1997.
(7)  After $0.03 per share loss from extraordinary item in 1997.  Fully diluted
     per share amounts differ in 1996 ($0.20) and 1998 ($0.38).
</FN>
</TABLE>
<PAGE>
 
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATION
 
This Form 10-K contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934.  Actual results could differ materially
from those projected in the forward-looking statements located in the
Research and Development, Sales and Marketing, and Liquidity and Capital
Resources sections as a result of the factors set forth below, among
others.
 
The Company has experienced, and may in the future experience,
significant fluctuations in revenues and operating results.  The
Company's revenues and operating results in general, and in particular
its revenues from new licenses, are relatively difficult to forecast for
a number of reasons, including:(i) the relatively long sales cycles for
the Company's products, (ii) the variable size and timing of individual
license transactions, (iii) changes in demand for the Company's products
and services, (iv) competitive conditions in the industry, (v) changes
in customer budgets, (vi) the timing of the introduction of new products
or product enhancements by the Company or its competitors, (vii) the
Company's success in and costs associated with developing and
introducing new products, (viii) product life cycles, (ix) changes in
the proportion of revenues attributable to license fees versus services,
(x) the percentage of license fees attributable to third party software,
(xi) changes in the level of operating expenses, (xii) delay or deferral
of customer implementations of the Company's software, (xiii) software
defects and other product quality problems, and (xiv) effect of AICPA
Statements of Position on the Company's revenue recognition, (xv) other
economic conditions generally or in specific industry segments.
Further, the purchase of the Company's products generally involves a
significant commitment of capital, with the attendant delays frequently
associated with large capital expenditures and authorization procedures
within large organizations.  For these and other reasons, the sales
cycles for the Company's products are typically lengthy and subject to a
number of significant risks over which the Company has little or no
control, including customers' budget constraints and internal
authorization reviews.  In addition, delays in the completion of a
product implementation may require that the revenues associated with
such implementation be recognized over a longer period than originally
anticipated.  Such delays in the implementation or execution of orders
have caused, and may in the future cause, material fluctuations in the
Company's operating results.  Similarly, customers may cancel
implementation projects at any time without penalty, and such
cancellation could have a material adverse effect on the Company's
business or results of operations.  Because the Company's expenses are
relatively fixed, a small variation in the timing of recognition of
specific revenues can cause significant variations in operating results
and may in some future period result in losses or have a material
adverse effect on the Company's business or results of operations.
 
RESULTS OF OPERATIONS
 
Overview
 
Business.  Indus International, Inc. (the "Company" or "Indus")
develops, markets, and supports a proprietary line of enterprise asset
management software and implementation services.  The Company serves as
an agent of change for its customers, who seek to improve their return
on investment and efficiencies in core business functions in the
utilities and energy industry, process, discreet and consumer packaged
goods companies, as well as educational, municipal and transportation
authorities worldwide.
 
Merger.  The Indus Group, Inc. entered into an agreement and plan of
merger and reorganization on June 5, 1997 with TSW International, Inc.,
a Georgia corporation(the "Merger), pursuant to which The Indus Group,
Inc. and TSW International, Inc. each became subsidiaries of a new
Delaware corporation named Indus International, Inc..  On December 31,
1997, the Company's subsidiaries, The Indus Group, Inc. and TSW
International, Inc., each merged with and into the Company.  The
Company, as the surviving corporation, assumed all obligations of the
two subsidiaries.  The Merger was consummated on August 25, 1997, as a
tax-free reorganization pursuant to the provisions of Section 368 of the
Internal Revenue Code of 1986, and has been accounted for as a pooling
of interests. See Note 1 to the Consolidated Financial Statements
 
Other risks relating to the Company's business as a result of the Merger
include: (i) the Combined Company's ability to manage growth; (ii) the
utilization by the Company of new distribution channels; and (iii) risks
relating to the successful integration of current and future products
and technologies.
 
The Company derives its revenues primarily from software licenses,
implementation and training services and maintenance fees.  While the
Company has derived a significant portion of its revenues from electric
utilities to date, it also derives revenues from customers such as the
oil and gas companies, petrochemical companies, manufacturers,
hospitals, educational systems, governments, transportation authorities
and steel and forest product companies.
 
The Company provides its software to customers under contracts, which
provide for software license fees and system implementation services.
Revenues from software license fees, which typically have ranged from
approximately $100,000 to $5 million for initial software license fees,
are recognized as earned revenue in accordance with AICPA Statement of
Position 97-2, Software Revenue Recognition, when persuasive evidence of
arrangement exists, delivery has occurred, the license fee is fixed and
determinable and collection of the resulting receivable is deemed
probable. Effective in the three months ended September 30, 1997, The
Indus Group, Inc., began to report applicable new license fees on
standard software products not requiring substantial modification or
customization as earned revenue upon shipment to customers.  Previously,
because substantial modification and customization of software products
was expected by customers, The Indus Group, Inc. had deferred the
applicable license fees initially and recognized those fees as earned
over the period of modification, customization and other installation
services.  TSW International, Inc. had always recognized license fees
upon shipment of product.  Revenues from system implementation services,
which typically are time and material-based, are recognized as direct
contract costs are incurred, and typically range from one to three times
the license fees.
 
Revenues depend in part on revenues from the closing of new contracts
during the year. Maintenance and support services, for which the Company
typically charges 15-18% of the original license fee per year, are
subject to separate contracts whereby revenue is recognized ratably over
the contract period.
 
In March 1997, Indus International, Inc. acquired a 10% interest in
TenFold Corporation, a private software company for approximately $8
million in cash. The Indus Group, Inc. received a perpetual,
unrestricted license for future applications and tools developed with
TenFold's technology.  In April 1997, The Indus Group, Inc. acquired
Prism Consulting, Inc. a private management-consulting firm, for $4.75
million of The Indus Group, Inc.'s stock at the then current market
value and $250,000 in cash. Substantially all of the purchase cost was
allocated to intangible assets and is included in investments and
intangible assets.  In September 1998, the Company purchased the right,
title and interest to the intellectual property related to radiological
recording and tracking software called Total Exposure for $469,000.  The
$469,000 acquisition cost is being amortized over a two and a half-year
period.
 
The Company has in the past and may in the future acquire complementary
products or businesses.  Risks associated with such transactions include
difficulty in retaining and assimilating the personnel of the combined
companies, difficulty in integrating the operations of the combined
companies, disruption of the company's ongoing business, expenses
associated with completing the transaction and amortizing acquired
intangible assets, and dilution of existing equity holders.  There can
be no assurance that such transactions will not materially adversely
affect Indus' business, financial condition or operating results.
 
Operating Results
 
The following table sets forth for the periods indicated the percentage of total
revenues  represented  by certain  line  items in the  Company's  statements  of
operations:
<TABLE>
<CAPTION>
                                                 Percentages of Total Revenues
                                                  Years Ended December 31,
                                               --------------------------------
Statement of Operations Data:                     1996       1997       1998
                                               ---------- ---------- ----------
<S>                                            <C>        <C>        <C>
Revenues:
   Software licensing fees ...................      30.1%      31.6%      28.4%
   Services, and maintenance and other .......      69.9%      68.4%      71.6%
                                               ---------- ---------- ----------
     Total revenues ..........................     100.0%     100.0%     100.0%
Cost of revenues .............................      44.6%      44.4%      53.0%
                                               ---------- ---------- ----------
Gross margin .................................      55.4%      55.6%      47.0%
                                               ---------- ---------- ----------
Operating expenses:
   Research and development ..................      16.3%      15.6%      15.5%
   Sales and marketing .......................      18.5%      19.0%      16.1%
   General and administrative ................      10.4%       8.5%       7.8%
   Merger and restructuring expenses .........      --          6.8%      --
                                               ---------- ---------- ----------
     Total operating expenses ................      45.2%      49.9%      39.4%
                                               ---------- ---------- ----------
Income (loss) from operations ................      10.2%       5.7%       7.6%
Other income (expense) net ...................      -1.3%      -1.1%      -0.5%
                                               ---------- ---------- ----------
Income (loss) before income taxes ............       8.9%       4.6%       7.1%
Provision for income taxes ...................       4.8%       3.6%       0.2%
Cumulative effect of deferred income taxes
provided upon conversion by The Indus Group,
Inc. to a C Corporation ......................       4.7%      --         --
                                               ---------- ---------- ----------
Income (loss) before extraordinary item ......      -0.6%       1.0%       6.9%
Extraordinary item ...........................      --         -0.4%      --
                                               ---------- ---------- ----------
Net income (loss) ............................      -0.6%       0.6%       6.9%
                                               ========== ========== ==========
Pro forma statement of operations as adjusted:
   Income (loss) before income taxes .........       8.9%
   Provision for income taxes (federal, state
   and foreign) ..............................       4.8%
                                               ----------
   Pro forma net income (loss) ...............       4.1%
                                               ==========
</TABLE>
 
 
Revenues.  The Company's revenues are derived from software licensing
fees and from services, which include implementation and training
services coupled with maintenance fees.  Total revenues increased 23.8%
from $143.0 million in 1996 to $177.0 million in 1997, and 10.4% to
$195.5 million in 1998. The increase in total revenue is largely
attributable to the growth in services revenue, which was partially
offset by a decrease in license fees, due to lower than anticipated
licensing agreements with new and existing customers in 1998.  The
overall annual growth in services and maintenance revenue results from
the high level of services required to fulfill the implementation needs
of the customers.  Revenue from international customers (from sales
outside the United States, Canada and Mexico) accounted for 20%, 14% and
13% of revenues for the years ending December 31, 1996, 1997, and 1998,
respectively.  As most of the Company's existing contracts are
denominated in U.S. dollars, foreign currency fluctuations have not
significantly impacted the results of operations.
 
Effective in the three months ended September 30, 1997, The Indus Group,
Inc. began to report applicable new license fees on standard software
products not requiring substantial modification or customization as
earned revenue upon shipment to customers.  Previously, because
substantial modification and customization of software products was
expected by customers, The Indus Group, Inc. had deferred the applicable
license fees initially and recognized those fees as earned over the
period of modification, customization and other installation services.
TSW International, Inc., which had not been required to perform
substantial customization services, continued to recognize the
applicable portion of license fees as earned upon shipment of standard
software products to customers.
 
The Company does not believe that the revenue growth experienced in 1998
is necessarily indicative of any revenue growth that may occur in future
periods.
 
Cost of Revenues.  Cost of revenues consists primarily of: (i) personnel
and related costs for implementation (including account executive
personnel), (ii) training and customer support services and (iii)
sublicense fees to third parties upon the sale of the Company's product
containing such third-party software.  Gross margin on license fees is
substantially higher than gross margin on service revenue, reflecting
the low packaging and production costs of software products and third
party software costs compared with the relatively high personnel costs
associated with providing implementation, maintenance, consulting and
training services.
 
Cost of revenues increased 23.3% from $63.7 million in 1996 to $78.6
million in 1997 and 31.7% to $103.5 million in 1998.  The 1996 increase
resulted from the cost of increased services associated with major new
license agreements as well as the cost of additional services associated
with the expansion of existing projects.  The 1997 and 1998 increase in
absolute dollars in cost of revenues was due principally to the need for
additional personnel to service the Company's customers.
 
Research and Development (R&D).  Research and development expenses
consist primarily of: (i) personnel and related costs and, (ii) third
party consultant fees directly attributable to the development of new
software application products, enhancements to existing products and the
porting of Indus' products to different platforms.
 
Research and development expenses increased 18.9% from $23.3 million in
1996 to $27.7 million in 1997 and 9.8% to $30.4 million in 1998, and
represented 16.3%, 15.6%, and 15.5%, respectively, of total revenues in
those years.  While R&D expenses continue to increase year over year in
absolute dollars, they declined slightly as a percentage of total
revenue due to the overall increase in revenues.  During 1998, the
Company invested resources in developing PASSPORT Release 6.1 which was
completed by April 1998 and EMPAC Releases 7.6.16, 7.6.17 and 7.7 which
were completed by January 1998, April 1998 and August 1998,
respectively.  The Company believes that a significant level of
investment in R&D is essential to remain competitive. Research and
development in absolute dollars for a particular period may vary
depending on the projects in progress.
 
Sales and Marketing. Sales and marketing expenses include personnel
costs, which include sales commissions involved in the sales and
marketing of the Company's products and services and the costs of
advertising, public relations and participation in industry conferences
and trade shows. Sales and marketing expenses increased 26.6% from $26.5
million in 1996 to $33.6 million in 1997 and decreased 6.1% to $31.5
million in 1998.  As a percent of total revenue, sales and marketing
expenses were 18.5%, 19.0%, and 16.1% for 1996, 1997, and 1998,
respectively. The decrease in sales and marketing expenses in absolute
dollars is primarily due to (i) restructuring of the sales force, and
(ii) changes in the mix of the revenue base on which commission expense
is generated.
 
General and Administrative. General and administrative expenses include
the costs of finance, human resources and administrative operations.
General and administrative expenses were level at $15.0 million in 1996
and 1997, with a 1.9% increase to $15.3 million in 1998.  These expenses
represented 10.5%, 8.5%, and 7.8% of total revenues in those years.
General and administrative expenses in absolute dollars declined as a
percentage of total revenues due to the growth in revenue and the
relatively fixed nature of some portions of general and administrative
expenses. General and administrative expenses are expected to increase
in absolute dollars in future years.
 
Merger and Restructuring. The Company recorded $9.98 million in merger
related costs in 1997.  This included approximately $6.7 million for
transaction fees and professional services, $1.7 million for consulting
services incurred by a significant shareholder and $1.6 million for
other costs incident to the merger. In addition to the merger-related
costs, the Company provided for costs and losses as a result of the
restructuring of the Company totaling $2.1 million during 1997.  Of the
total cost, $0.9 million resulted from excess facilities and $1.2
million from termination costs of excess or redundant employees.
 
Provision for Income Taxes. Income tax expense of $0.45 million
represented federal and state corporate income taxes for the Company,
for the year ended December 31, 1998 and reflects a $5.0 million tax
benefit for utilization of net operating loss carryovers and other tax
credits. As a result of the Merger, Indus International, Inc. has
domestic net operating loss carryforwards in excess of $10.2 million
which will expire in years 2010 through 2012 if not utilized; domestic
research and experimental tax credits of approximately $0.72 million
which expire in years 2010 to 2012 if not utilized; domestic and foreign
tax credits of approximately $0.84 million which expire in years 1998
through 2002 if not utilized; and foreign net operating loss
carryforwards of approximately $2.9 million which can be carried forward
indefinitely.
 
Effective upon its incorporation in 1990, The Indus Group, Inc. elected
to have its United States income taxed under Subchapter S of the Code.
Accordingly, income tax provisions prior to 1996 were principally
attributable to state taxes and taxes imposed by foreign governments on
The Indus Group, Inc.'s foreign operations. The Indus Group, Inc.'s S
Corporation status terminated effective January 1, 1996, and The Indus
Group, Inc. was subject to federal income taxation at the corporate
level thereafter.  In relation to the termination of S Corporation
status as of January 1, 1996, a one-time charge representing a
cumulative net federal and state deferred income tax liability of $6.7
million was recorded.
 
Net Income (Loss)  The Company's net income was $13.4 million in 1998
compared with net income of $0.99 million recorded in 1997, due
primarily to increased revenues in the current year and merger and
restructuring expenses incurred in 1997.  In 1996 the Company incurred a
net loss of $0.875 million due to the effect of the one-time income tax
charge associated with the company's conversion to C Corporation status.
 
Pro Forma Net Income (Loss).  For purposes of presenting comparative
earnings and calculating per share data, pro forma net income for the
year ended December 31, 1996 reflects the elimination of the $6.7
million nonrecurring cumulative deferred income tax charge upon
converting from an S Corporation to a C Corporation.
 
Liquidity and Capital Resources
 
Indus International, Inc. finances its activities primarily through cash
provided by operations and borrowings under its line of credit.
Historically, The Indus Group, Inc. has financed its activities
primarily through cash provided by operations and borrowings under its
line of credit and a public offering of Common Stock.  In March 1996,
The Indus Group, Inc. received $33.9 million, representing the proceeds
(net of underwriting commissions and offering costs) from an initial
public offering of 2,500,000 shares of its Common Stock.  These proceeds
were used to purchase marketable securities (comprised of municipal and
U.S. government obligations) and certain cash equivalent instruments.
TSW International, Inc. financed its activities prior to the Merger
largely through approximately $38.0 million provided by its principal
shareholder in exchange for subordinated notes and preferred stock.
 
Cash provided by (used in) operations was $8.3 million, ($10.6) million
and $24.0 million in 1996, 1997 and 1998, respectively.  Unbilled
accounts receivable decreased substantially in 1998 due to the increased
effort and efficiency in the Company's billing process.  Investing
activities, consisting primarily of the purchase and sale of marketable
securities, the acquisitions of investments and intangible assets, and
the acquisition of property and equipment, used cash of $35.7 million,
$5.2 million, and $5.8 million, in 1996, 1997 and 1998, respectively.
Financing activities in 1996 generated cash of $40.9 million primarily
from the issuance of redeemable preferred and common stock.  Financing
activities provided cash of $13.1 million, in 1997 primarily from the
drawdown from the Company's lines of credit.  Financing activities in
1998 used $5.7 million primarily due to repayments under the Company's
lines of credit.
 
As of December 31, 1998, the Company's principal sources of liquidity
consisted of approximately $39.2 million in cash, cash equivalents and
marketable securities, and a revolving bank line of credit of $35.0
million, which is secured by all of the Company's accounts receivables.
The revolving credit facility expires July 31, 1999. The revolving
credit facility bears an interest rate of the one month LIBOR rate plus
1.25% (6.74% as of December 31, 1998). Approximately $19.7 million had
been drawn down under this line of credit at December 31, 1998.
 
Cash requirements are expected to continue to increase in order to fund:
(i) personnel and salary costs, (ii) research and development costs,
(iii) investment in additional technical equipment, and (iv) working
capital requirements. The Company presently anticipates additional
capital expenditures of approximately $12 million in 1999, primarily for
equipment and furniture.
 
In addition to its line of credit, the Company's principal commitments
at December 31, 1998 consisted of obligations under operating and
capital leases for facilities and computer equipment.
 
The Company believes that its existing cash and marketable securities,
together with anticipated cash flow from operations and available bank
borrowings, will be sufficient to meet its cash requirements during the
next 12 months.  The foregoing statement regarding the Company's
expectations for continued liquidity is a forward-looking statement, and
actual results may differ materially depending on a variety of factors,
including variable operating results or presently unexpected uses of
cash, such as for acquisitions.
 
Year 2000 Risk Disclosure
 
The Year 2000 Issue and the Nature and Effects of the Year 2000 on
Information Technology (IT) and Non-IT Systems:
 
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of
the Company's computer programs or hardware that have date-sensitive
software or embedded chips may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send
invoices, or engage in similar normal business activities.
 
The Company's plan to resolve the Year 2000 Issue involves the
continuing effort in the following four phases: assessment, remediation,
testing, and implementation. To date, the Company has made progress in
identifying of all systems that could be significantly affected by the
Year 2000 and have identified areas that require Y2K testing services.
The completed assessment could indicate that most of the Company's
significant information technology systems will be affected,
particularly the general ledger, project accounting and billing systems.
In addition, the Company is in the process of gathering information
about the Year 2000 compliance status of its significant suppliers and
subcontractors and will continue to monitor their compliance.
 
Status of Progress in Becoming Year 2000 Compatible: The Company has a
formal Year 2000 Program focusing on four key areas: 1) Information
Technology, addressing internal software and business systems; 2) the
Company's Products; 3) Third Party, addressing the preparedness of non-
IT suppliers; 4) the Company's Facilities. For each readiness area,
based on a phased approach, the Company is performing a worldwide risk
assessment, remediating and conducting testing, implementing solutions,
and communicating with employees, suppliers and customers to raise
awareness of the Year 2000 problem.  The Year 2000 Program is managed by
full time Y2K project personnel. The Company has inventoried key
suppliers of goods and services to the Company and has mailed surveys to
many of these suppliers. It is the process of evaluating responses and
following-up. The Company intends to disqualify potentially non-
compliant sources and re-qualify alternative sources to help mitigate
potential business disruptions.
 
Information Technology Program: The Company is continuing it's
assessment of internal applications and computer hardware. The program
is addressing not only the supplier's year 2000 product integrity but
also assesses the supplier's ability to provide product and services.
Hardware assessment includes workstations, servers, telecommunication
equipment and other items. The assessment of major applications, servers
and networks is 75% complete and is due for completion at the end of
March 1999. Presently, 80% of the major applications have been verified
compatible, 20% require upgrade or testing. Furthermore 20% of the
servers and networks that required action have been addressed. These
phases run concurrently for different systems. Completion of the testing
phase for all significant systems is expected by June 30, 1999, with all
remediated systems fully tested and implemented by September 30, 1999.
 
Product Readiness Program: This program focuses on identifying and
resolving the Year 2000 issues existing in the Company's currently
supported products. It encompasses a number of activities including
product testing, evaluation, product engineering and quality assurance.
The program began in 1998 and work will continue through 1999.
 
Third Party Program: The Company is querying its significant suppliers
and subcontractors that do not share information systems with the
Company (external agents Testing and implementation are scheduled for
June 1999 completion. To date, the Company is not aware of any external
agent with a Year 2000 issue that would materially impact the Company's
results of operations, liquidity, or capital resources. However, the
Company has no means of ensuring that external agents will be Year 2000
ready. There may be certain third parties, such as utilities,
telecommunication companies or material vendors where alternate
arrangements or sources are limited or unavailable. The inability of
external agents to complete their Year 2000 resolution process in a
timely fashion could materially impact the Company. The effect of non-
compliance by external agents is not determinable.
 
Indus Facilities Program: The Company is conducting an assessment of all
the Indus facilities and facility suppliers worldwide. The assessment is
approximately 25% complete as of February 1999. The expected completion
date for surveying the facilities and facility suppliers is March 1999.
Remediation is approximately 15% complete as of February 1999. Testing
and implementation of affected equipment is expected to be 90% complete
by July 1999.
 
Contingency Plans: The Company currently has no contingency plans in
place in the event it does not complete all phases of the Year 2000
program. The Company is currently evaluating the status of completion to
determine whether such a plan is necessary. There can be no assurance
that the Company will be able to develop a contingency plan that will
adequately address issues that may arise in the year 2000. Failure by
the Company to develop and implement, if necessary, an appropriate
contingency plan could have a material impact on the operations of the
Company.
 
Costs: The Company will utilize both internal and external resources to
reprogram, or replace, test, and implement the software and operating
equipment for Year 2000 modifications. The total cost of the Year 2000
project is currently estimated at an amount up to $3.0 million and will
be funded through operating cash flows. To date, the Company has
incurred approximately $1 million, related to all phases of the Year
2000 project. The majority of the total costs will be incurred during
the next four quarters. The Company is continuing its assessment and
refining its cost estimates. There can be no assurance, however that
there will not be a delay in, or increased costs associated with the
programs described in this section.
 
Summary: Management of the Company believes it has an effective program
in place to resolve the Year 2000 issue in a timely manner. As noted
above, the Company has not yet completed all necessary phases of the
Year 2000 program. In the event that the Company does not complete any
additional phases, the Company may have difficulty in processing
customer invoices or payments. In addition, disruptions in the economy
generally resulting from Year 2000 issues could also materially
adversely affect the Company. The Company could be subject to litigation
for computer systems product failure, for example, equipment shutdown or
failure to properly date business records. The amount of potential
liability and lost revenue cannot be reasonably estimated at this time.
 
 
ITEM 7A.  MARKET RISKS
 
The Company's cash flow can be exposed to market risks primarily in the
form of changes in interest rates in its short term borrowings under its
revolving bank line of credit as well as its investments in certain
available-for-sale securities.  The revolving bank line of credit bears
an interest rate of the one month LIBOR rate plus 1.25% and can
fluctuate with changes in the monthly LIBOR rate.  If the LIBOR rate
adversely increased by 100 basis points, the Company's interest expense
would increase by approximately $146,000 per annum.  The Company's cash
management and investment policies restrict investments to highly
liquid, low risk debt instruments.  The Company currently does not use
interest rate derivative instruments to manage exposure to interest rate
changes.  A hypothetical 100 basis point adverse move (decrease in)
interest rates along the entire interest rate yield curve would
adversely affect the net fair value of all interest sensitive financial
instruments by approximately $251,000 at December 31, 1998.  The
Company's earnings or cash flow is currently not subject to material
fluctuations due to changes in foreign currency exchange rates.
 
 
 
 
 
 
 
 
 
 
 
 
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
                            INDUS INTERNATIONAL, INC.
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
 
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
 
CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 1998 AND 1997
 
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE YEARS IN THE
PERIOD ENDED DECEMBER 31, 1998
 
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR EACH OF THE THREE
YEARS IN THE PERIOD ENDED DECEMBER 31, 1998
 
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR EACH OF THE THREE YEARS IN THE
PERIOD ENDED DECEMBER 31, 1998
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
<PAGE>
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
 
 
The Boards of Directors and Stockholders
Indus International, Inc.
 
        We have audited the accompanying consolidated balance sheets of
Indus International, Inc. as of December 31, 1998 and 1997, and the
related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended December 31,
1998. Our audits also included the financial statement schedule listed
in the Index at Item 14(a). These financial statements and schedule are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedule based on
our audits.
 
        We conducted our audits in accordance with generally accepted
auditing standards.  Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis for
our opinion.
 
        In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Indus International, Inc. as of December 31, 1998
and 1997, and the consolidated results of its operations and its cash
flows for each of the three years in the period ended December 31, 1998,
in conformity with generally accepted accounting principles. Also, in
our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.
 
                                            /s/ ERNST & YOUNG
 
Palo Alto, California
January 26, 1999
 
 
 
 
 
 
<PAGE>
 
 
 
 
 
 
 
 
 
 
 
                           INDUS INTERNATIONAL, INC.
                          CONSOLIDATED BALANCE SHEETS
                               (In thousands)
<TABLE>
<CAPTION>
                                                              December 31,
                                                         ----------------------
                                                            1997        1998
                                                         ----------  ----------
<S>                                                      <C>         <C>
                            ASSETS
Current assets:
   Cash and cash equivalents ...........................   $11,052     $23,554
   Marketable securities ...............................    11,880      15,596
   Billed accounts receivable, less allowance for
   doubtful accounts of $1,974 and $3,578 on
   December 31, 1997 and 1998, respectively ............    43,574      56,921
   Unbilled accounts receivable ........................    30,349      21,474
   Other current assets ................................     5,773       5,517
                                                         ----------  ----------
     Total current assets ..............................   102,628     123,062
Marketable securities - noncurrent .....................     4,818        --
Property and equipment, net ............................    16,570      15,906
Investments and intangible assets, net .................    12,119      11,364
Employee notes receivable ..............................       416         322
Other assets ...........................................       174         131
                                                         ----------  ----------
                                                          $136,725    $150,785
                                                         ==========  ==========
             LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Borrowing under lines of credit .....................   $26,650     $19,650
   Accounts payable ....................................     8,430       9,482
   Deferred income taxes ...............................       419        --
   Other accrued liabilities ...........................    14,068      16,721
   Current portion of obligations under capital leases .     2,404       1,355
   Deferred revenue ....................................    13,419      17,245
                                                         ----------  ----------
     Total current liabilities .........................    65,390      64,453
                                                         ----------  ----------
 
Obligations under capital leases and term loans ........     1,105         257
 
Commitments and contingencies ..........................
 
Stockholders' equity:
   Preferred stock .....................................      --          --
   Common stock ........................................        29          32
   Additional paid-in capital ..........................    98,608     102,622
   Deferred compensation and other......................      (262)       (740)
   Accumulated deficit .................................   (26,688)    (13,273)
   Accumulated other comprehensive income ..............    (1,457)     (2,566)
                                                         ----------  ----------
Total stockholders' equity .............................    70,230      86,075
                                                         ----------  ----------
                                                          $136,725    $150,785
                                                         ==========  ==========
</TABLE>
                          See accompanying notes.
<PAGE>
 
                              INDUS INTERNATIONAL, INC.
 
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     (In thousands, except per share amounts)
<TABLE>
<CAPTION>
                                                    Year Ended December 31,
                                               --------------------------------
                                                  1996       1997       1998
                                               ---------- ---------- ----------
<S>                                            <C>        <C>        <C>
Revenues:
   Software licensing fees ...................   $43,060    $55,958    $55,546
   Services and maintenance ..................    97,515    119,382    138,956
   Other revenue .............................     2,463      1,694        975
                                               ---------- ---------- ----------
     Total revenues ..........................   143,038    177,034    195,477
Cost of revenues .............................    63,738     78,575    103,517
                                               ---------- ---------- ----------
Gross margin .................................    79,300     98,459     91,960
                                               ---------- ---------- ----------
Operating expenses:
   Research and development ..................    23,265     27,664     30,372
   Sales and marketing .......................    26,523     33,568     31,517
   General and administrative ................    14,951     14,991     15,270
   Merger and restructuring expenses .........      --       12,083       --
                                               ---------- ---------- ----------
     Total operating expenses ................    64,739     88,306     77,159
                                               ---------- ---------- ----------
Income (loss) from operations ................    14,561     10,153     14,801
Interest and other income ....................     1,391      1,590      1,118
Interest expense .............................    (3,278)    (3,558)    (2,054)
                                               ---------- ---------- ----------
Income (loss) before income taxes ............    12,674      8,185     13,865
Provision for income taxes ...................     6,849      6,408        450
Cumulative effect of deferred income taxes
provided upon conversion by The Indus Group,
Inc. to a C Corporation ......................     6,700       --         --
                                               ---------- ---------- ----------
Income (loss) before extraordinary item ......      (875)     1,777     13,415
Extraordinary item ...........................      --         (787)      --
                                               ---------- ---------- ----------
Net income (loss) ............................     ($875)      $990    $13,415
                                               ========== ========== ==========
Pro forma statement of operations as adjusted:
   Income (loss) before income taxes .........    12,674
   Provision for income taxes (federal, state
   and foreign) ..............................     6,849
                                               ----------
   Pro forma net income (loss) ...............    $5,825
                                               ==========
Income (loss) per share (computed on pro
 forma net income (loss) in 1996):
Basic
   Income (loss) before extraordinary item ...     $0.22      $0.06      $0.44
   Extraordinary item ........................      --       ($0.03)      --
                                               ---------- ---------- ----------
   Net income (loss) .........................     $0.22      $0.03      $0.44
                                               ========== ========== ==========
Diluted
   Income (loss) before extraordinary item ...     $0.20      $0.05      $0.38
   Extraordinary item ........................      --       ($0.02)      --
                                               ---------- ---------- ----------
   Net income (loss) .........................     $0.20      $0.03      $0.38
                                               ========== ========== ==========
Shares used in computing per share data
   Basic .....................................    25,976     28,574     30,717
   Diluted ...................................    28,821     33,448     35,263
 
</TABLE>
                     See accompanying notes.
 
<PAGE>
 
 
 
 
 
 
 
                               INDUS INTERNATIONAL, INC.
 
                  CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                  (In thousands)
<TABLE>
<CAPTION>                                                                                           Accumulated
                                               Common   Common   Additional  Deferred                  Other        Total
                                               Stock     Stock    Paid-In   CompensationAccumulated ComprehensiveStockholders'
                                               Shares   Amount    Capital    and Other    Deficit     Income        Equity
                                              -------- --------- ---------- ----------- ----------- ------------ ------------
<S>                                           <C>      <C>       <C>        <C>         <C>         <C>          <C>
Balance at December 31, 1995 .................    723      $612    $21,013       ($432)   ($41,450)       ($216)    ($20,473)
  Conversion of The Indus Group, Inc. to
  a C Corporation effective January 1, 1996 ..              --      (8,223)      --          8,223        --            --
  Reincorporation ............................             (494)       494       --          --           --            --
  Issuance of common stock (1) ............... 18,678         4     35,399       --          --           --          35,403
  Tax benefit from exercise of stock options .              --       6,669       --          --           --           6,669
  Purchase of Indus International, Inc. net
     assets ..................................             (100)        (3)      --          --           --            (103)
  Other ......................................              --        --            96       --           --              96
  Net loss ...................................              --      (6,700)      --          5,825        --            (875)
  Unrealized loss on marketable securities ...
  Foreign currency translation ...............              --        --         --          --            ($42)         (42)
                                                            --        --         --          --             ($9)          (9)
                                                                                                                 ------------
  Comprehensive loss..........................                                                                          (926)
                                              -------- --------- ---------- ----------- ----------- ------------ ------------
Balance at December 31, 1996 ................. 19,401        22     48,649        (336)    (27,402)        (267)      20,666
  Capital contribution by a TSW shareholder ..              --       1,717       --          --          --            1,717
  Reincorporation as Indus International, Inc.               (4)         4       --          --          --             --
  Issuance of common stock (2) ...............  1,196       --       6,725       --          --          --            6,725
  Tax benefit from exercise of stock options .              --       3,479       --          --          --            3,479
  Redemption of TSW subordinated notes (3) ...  1,290         8     19,937       --          --          --           19,945
  Exchange of common stock for TSW
     redeemable preferred stock (4) ..........  8,049         3     18,097       --          --          --           18,100
  Elimination of TSW's net income for the
     three months ended March 31, 1997 (5) ...              --        --         --           (276)      --             (276)
  Other ......................................              --        --            74       --          --               74
  Net income .................................                                                 990                       990
  Unrealized loss on marketable securities ...                                                               56           56
  Foreign currency translation ...............                                                           (1,246)      (1,246)
                                                                                                                 ------------
  Comprehensive loss .........................                                                                          (200)
                                              -------- --------- ---------- ----------- ----------- ------------ ------------
Balance at December 31, 1997 ................. 29,936        29     98,608        (262)    (26,688)      (1,457)      70,230
  Exercise of stock options ...............     1,507         2      2,750       --          --          --            2,752
  Tax benefit from exercise of stock options .              --         294       --          --          --              294
  Sale of common stock under ESPP ............    174         1        970       --          --          --              971
  Note receivable from stockholder ...........              --                    (492)      --          --             (492)
  Other ......................................              --        --            14       --          --               14
  Net income .................................              --        --         --         13,415       --           13,415
  Unrealized loss on marketable securities ...              --        --         --          --              (6)          (6)
  Foreign currency translation ...............                                                           (1,103)      (1,103)
                                                                                                                 ------------
  Comprehensive income .......................                                                                        12,306
                                              -------- --------- ---------- ----------- ----------- ------------ ------------
Balance at December 31, 1998 ................. 31,617       $32   $102,622       ($740)   ($13,273)     ($2,566)     $86,075
                                              ======== ========= ========== =========== =========== ============ ============
</TABLE>
                             See accompanying notes.
 
                            INDUS INTERNATIONAL, INC.
           CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY--(Continued)
 
(1)  Includes $33,864 received from February 29, 1996 initial public offering of
     The Indus Group, Inc.  (2,500,000 common shares offered at $15.00 per share
     less underwriting commission and expenses).
 
(2)  Includes $4,750 (339,285 shares of common stock at $14.00 per share) issued
     with $250 in cash to acquire a management consulting firm.
 
(3)  Redemption of TSW  International,  Inc.  subordinated notes and accumulated
     interest in exchange for 1,235,879  common  shares of Indus  International,
     Inc.
 
(4)  Exchange  of  8,049,025  common  shares of Indus  International,  Inc.  for
     redeemable  preferred  stock of TSW  International,  Inc. and 53,937 common
     shares for accumulated dividends.
 
(5)  Net income of TSW International,  Inc. for the three months ended March 31,
     1997, $276, included in both 1996 and 1997 combined operating results, as a
     result of change in TSW International, Inc.'s fiscal year end.
 
                             See accompanying notes.
 
<PAGE>
 
 
 
 
 
 
 
 
 
                           INDUS INTERNATIONAL, INC.
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (In thousands)
<TABLE>
<CAPTION>
                                                      Years Ended December 31,
                                                  -----------------------------
                                                    1996      1997      1998
                                                  --------- --------- ---------
<S>                                               <C>       <C>       <C>
Cash flows from operating activities:
Net income (loss) ...............................    ($875)     $990   $13,415
Elimination of TSW's net income for the three
months ended March 31, 1997 .....................     --        (276)     --
Adjustments  to  reconcile  net  income  (loss)
to net cash  used in  operating activities:
   Depreciation and amortization ................    3,440     5,969     7,922
   Provision for doubtful accounts ..............      370       891     1,604
   Amortization of deferred compensation ........      555        74        14
   Loss on sale of fixed assets .................     --         332       (24)
   Write-off goodwill ...........................      688      --        --
   Cumulative effect of deferred income taxes
     provided January 1, 1996 ...................    6,700      --        --
   Tax benefit from exercise of stock options ...     --       3,479       294
   Merger expense resulting from equity
     transaction ................................     --       2,009      --
   Extraordinary charge to net income from debt
     extinguishment .............................     --         787      --
   Changes in operating assets and liabilities:
     Billed accounts receivable .................   (6,536)   (8,604)  (14,951)
     Unbilled accounts receivable ...............   (3,946)  (10,952)    8,875
     Other current assets .......................   (1,403)      592       256
     Other assets ...............................   (3,415)      798       (43)
     Employee notes receivable ..................      (61)      121        94
     Accounts payable ...........................     (328)    1,424     1,052
     Deferred income taxes ......................   (3,189)   (3,418)     (419)
     Income taxes payable .......................    6,451      --        --
     Other accrued liabilities ..................    5,889     4,336     2,653
     Deferred revenue ...........................    3,444    (7,953)    3,826
     Cumulative currency translation ............       (9)   (1,246)   (1,103)
     Other ......................................      481        20       547
                                                  --------- --------- ---------
     Net cash (used in)/provided by in operating
       activities ...............................    8,256   (10,627)   24,012
                                                  --------- --------- ---------
Cash flows from investing activities:
Purchase of marketable securities ...............  (39,010)   (3,104)   (8,612)
Sale of marketable securities ...................   10,314    15,100     9,796
Investments and intangible assets ...............     --      (8,288)     (628)
Acquisition of property and equipment ...........   (6,982)   (8,901)   (6,418)
Other                                                 --        --          18
                                                  --------- --------- ---------
Net cash (used in)/provided by investing
  activities ....................................  (35,678)   (5,193)   (5,844)
                                                  --------- --------- ---------
Cash flows from financing activities:
Net drawdown/(repayment) of line of credit ......      (81)   10,659    (7,000)
Net drawdown/repayment of capital
  leases/notes payable ..........................      725       423    (1,897)
Net proceeds from issuance of redeemable
  preferred stock ...............................    5,000      --        --
Net proceeds from issuance of common stock ......   35,399     1,975     3,231
Purchase of Indus International, Inc.
  net assets ....................................     (103)     --        --
                                                  --------- --------- ---------
Net cash  used in/provided by financing             40,940    13,057    (5,666)
  activities ....................................
                                                  --------- --------- ---------
Net increase/(decrease) in cash and cash
  equivalents ...................................   13,518    (2,763)   12,502
Cash and cash equivalents at beginning of
  period ........................................      297    13,815    11,052
                                                  --------- --------- ---------
Cash and cash equivalents at end of period ......  $13,815   $11,052   $23,554
                                                  ========= ========= =========
Supplemental disclosures of cash flow
  information:
Interest paid ...................................   $1,464    $2,004    $1,245
                                                  ========= ========= =========
Income taxes paid ...............................   $5,712    $4,775      $735
                                                  ========= ========= =========
Supplemental schedule of noncash, investing
and financing activities:
Issuance of common stock in exchange for TSW
subordinated  notes and redeemable preferred
stock ...........................................   $ --     $38,045    $ --
                                                  ========= ========= =========
Issuance of common stock in exchange for
stockholder note receivable......................   $ --      $ --        $492
                                                  ========= ========= =========
Issuance of common stock in exchange for
investment ......................................   $ --      $4,750    $ --
                                                  ========= ========= =========
</TABLE>
                      See accompanying notes
<PAGE>
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                            INDUS INTERNATIONAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
1.  Nature of Business and Significant Accounting Policies
 
Organization and Business
 
Business
 
        Indus International, Inc. develops, markets and supports a
proprietary line of enterprise asset management software and
implementation services.  The Company serves as an agent of change for
its customers, who seek to improve their return on investment and
efficiencies in core business functions in the utilities and energy
industry, process, discreet and consumer packaged goods companies, as
well as educational, municipal and transportation authorities worldwide.
 
Merger
 
The Indus Group, Inc. entered into an agreement and plan of merger
and reorganization on June 5, 1997 with TSW International, Inc., a
Georgia corporation (the "Merger"), pursuant to which The Indus Group,
Inc. and TSW International, Inc. each became subsidiaries of a new
Delaware corporation named Indus International, Inc. (the "Company")
which was formed for the purpose of the transactions contemplated under
the Merger.  On December 31, 1997, the Company's subsidiaries, The Indus
Group, Inc. and TSW International, Inc., each merged with and into the
Company (the "Roll-up Merger").  The Company, as the surviving
corporation, assumed all obligations of the two subsidiaries, in
connection with the Roll-up Merger.  The Merger was consummated on
August 25, 1997, as a tax-free reorganization pursuant to the provisions
of Section 368 of the Internal Revenue Code of 1986, and has been
accounted for as a pooling of interests.  In connection with the Merger,
(a) each share of outstanding common stock of The Indus Group, Inc. was
converted into one share of Common Stock of the Company ("Common
Stock") and (b) each outstanding share of common stock of TSW ("TSW
Common Stock"), and each outstanding share of preferred stock of TSW
("TSW Preferred Stock"), was converted into approximately 2.73 shares
of the Company's Common Stock; (c) the outstanding subordinated floating
rate notes of TSW (including accrued interest thereon) were exchanged
for an aggregate of 1,235,879 shares of the Company's Common Stock; (d)
all rights to receive any unpaid dividends on TSW Preferred Stock were
converted into an aggregate of 53,937 shares of the Company's Common
Stock and (e) each outstanding option or warrant to purchase TSW Common
Stock was converted into an option or warrant, respectively, to purchase
that number of shares of the Company's Common Stock determined by
multiplying the number of shares of TSW Common Stock subject to such
option or warrant by approximately 2.73, at an exercise price per share
of the Company's Common Stock equal to the exercise price per share of
TSW Common Stock pursuant to such option or warrant divided by
approximately 2.73.  Based on the capitalization of TSW International,
Inc. as of August 25, 1997, approximately 10.2 million shares of the
Company's Common Stock were issued in the transaction and the Company
reserved approximately 7.9 million shares of its Common Stock for
issuance pursuant to the assumption of outstanding options and warrants
to purchase TSW Common Stock.
 
As a result of the transaction, the Company incurred charges to
operations of $9.98 million of merger related costs during  1997 that
related primarily to approximately $6.7 million for transaction fees and
professional services, $1.7 million for consulting services incurred by
a significant stockholder and $1.6 million for other costs incident to
the Merger.  Of the total charge, cash outflow through December 31, 1998
is $8.28 million and $1.7 million represented a noncash transaction.  In
addition to the merger-related costs, the Company accrued costs and
losses for the restructuring of the Company totaling $2.1 million.  Of
the total cost, $916,000 resulted from excess facilities that have been
vacated and $1.2 million from termination costs of excess or redundant
employees.  Of the total charge, cash outflow through December 31, 1998
is $1.4 million and $0.7 million are future outflows as of December 31,
1998.  The future outflows are expected to be paid in the first 6 months
of 1999.
 
        Prior to the Merger, TSW International, Inc. reported on a fiscal
year ending on March 31. Accordingly, the 1996 financial statements
combine the March 31, 1997 financial statements of TSW International,
Inc. with the December 31, 1996 financial statements of The Indus Group,
Inc., respectively. Revenues and the net income of TSW International,
Inc. for the three-month period ended March 31, 1997 were $21.4 million
and $0.3 million respectively, with the net income reflected as an
adjustment to retained earnings effective January 1, 1997.
 
Significant Accounting Policies
 
Basis of Presentation
 
        The consolidated financial statements include the accounts of
Indus International, Inc. and its subsidiaries (collectively, the
Company).  All significant intercompany balances and transactions have
been eliminated. All periods prior to the Merger include the combined
results of The Indus Group, Inc. and TSW International, Inc. on a
pooling of interests basis.  The functional currencies of the Company's
foreign subsidiaries are their respective local currencies.
Accordingly, gains and losses from the translation of the financial
statements of the foreign subsidiaries are included in stockholder's
equity and other comprehensive income.
 
Revenue Recognition
 
        The Company provides its software to customers under contracts,
which provide for both software license fees and system implementation
services.  Revenues from system implementation services, which generally
are time and material-based, are recognized as direct contract costs are
incurred.  The revenues from software license fees are recognized as
earned revenue in accordance with AICPA Statement of Position 97-2,
Software Revenue Recognition, when persuasive evidence of arrangement
exists, delivery has occurred and the license fee is fixed and
determinable.  Effective in the quarter ended September 30, 1997, Indus
International, Inc. began to report applicable new license fees on
standard software products not requiring substantial modification or
customization as earned revenue upon shipment to customers.  Previously,
because substantial modification and customization of software products
was expected by customers, The Indus Group, Inc. had deferred the
applicable license fees initially and recognized those fees as earned
over the period of modification, customization and other installation
services.  TSW International, Inc. which had not been required to
perform substantial customization services, continued to recognize the
applicable portion of license fees as earned upon shipment of standard
software products to customers.
 
Maintenance and support services are subject to separate contracts
for which revenue is recognized ratably over the contract period.
 
Unbilled accounts receivable represent amounts related to revenue
which has been recorded either as deferred revenue or earned revenue but
which has not been billed.  Generally, unbilled amounts are billed
within 60 to 90 days.
 
Deferred revenue represents primarily unearned maintenance and
support fees and unearned license fees, which have been billed but for
which future obligations remain.
 
Foreign Currency Translation
 
The financial statements of foreign subsidiaries have been
translated into U.S. dollars.  All balance sheet accounts have been
translated using the exchange rates in effect at the balance sheet date.
Income statement amounts have been translated using the average exchange
rate for the year.  The gains and losses resulting from the changes in
exchange rates from year to year have been reported in other
comprehensive income.
 
Concentration of Credit Risk
 
                The Company's customers are generally large companies in the
utilities and energy industries, process, discreet and consumer packaged
goods companies, as well as industrial manufacturing and the public
sector.  The Company performs ongoing credit evaluations of its
customers and does not require collateral.  The Company maintains
allowances for potential credit losses and such losses have been within
management's expectations.  No individual customers represented greater
than 10% of revenues in 1996, 1997 or 1998.
 
Cash Equivalents and Marketable Securities
 
The Company considers all highly liquid, low risk debt instruments
with a maturity of three months or less from the date of purchase to be
cash equivalents.  The Company generally invests its cash and cash
equivalents in money markets, mutual funds, commercial paper and
corporate notes.
 
        The Company presently classifies all marketable securities as
available-for-sale investments and carries them at fair market value.
Unrealized holding gains and losses, net of taxes, are included in
accumulated other comprehensive income (loss) within stockholders'
equity.
 
Property and Equipment
 
        Property and equipment is stated at cost.  Equipment under capital
leases is stated at lower of fair market value or the present value of
the minimum lease payments at the inception of the lease.
 
        Depreciation on office and computer equipment and furniture is
computed using the straight-line method over estimated useful lives of
four to seven years.  Leasehold improvements are amortized using the
straight-line method over the shorter of the related lease term or their
estimated useful lives.
 
Software Development Costs
 
        Software development costs are expensed as incurred until
technological feasibility of the software is established, after which
any additional costs are capitalized.  To date, the Company has expensed
all software development costs because development costs incurred
subsequent to the establishment of technological feasibility have not
been material.  Purchased software costs included in other assets
resulted principally from the acquisition by TSW International, Inc. of
SQL Systems International plc. These costs have been amortized over
three years, the estimated life of the related product.  Amortization
expense recorded in 1996, 1997, and 1998 was approximately $459,000,
$294,000, and $424,810 respectively.
 
Investments and Intangibles, net
 
        In 1997, The Indus Group, Inc. acquired convertible preferred
stock in Tenfold Corporation, a privately held software company in the
development stage, for approximately $8 million in cash.  This
investment, which if converted would result in a 10% interest, is
carried at cost.  Also in 1997, The Indus Group, Inc. acquired a
management consulting firm for $4.75 million in common stock (339,285
shares of The Indus Group, Inc. valued at $14 per share) and $250,000 in
cash.  The $5 million acquisition cost is being amortized over a four-
year period, which is consistent with the related employment,
confidentiality and non-competition agreements.  In 1998, the Company
purchased the rights; title and interest to the intellectual property
related to radiological recording and tracking software called Total
Exposure for $469,000.  The $469,000 acquisition cost is being amortized
over a two and one-half year period, which is the expected period of
benefit.
 
Advertising Costs
 
        Advertising costs are charged to expense in the period the costs
are incurred.  Advertising expense was approximately $486,000, $472,000,
and $222,330 in 1996, 1997 and 1998, respectively.
 
Income Taxes
 
        Effective January 1, 1996, The Indus Group, Inc. elected C
Corporation status for income tax purposes. Prior to 1996, The Indus
Group, Inc. was an S Corporation and, as a result, income determined on
the cash basis for income tax purposes was taxable to the shareholders,
and not The Indus Group, Inc., for federal and certain state income tax
purposes.  In connection with the termination of S Corporation status on
January 1, 1996, a $6.7 million cumulative effect charge was recorded.
The majority of the cumulative effect charge is due to changing from the
cash basis of accounting as an S Corporation to the accrual basis of
accounting as a C Corporation.  The related deferred tax liability is
payable over four years.
 
        The provision for income taxes included in the accompanying
financial statements represents state and foreign taxes in all years and
federal income taxes of The Indus Group, Inc. and Indus International,
Inc. for 1996 and 1997, without any current benefit for the operating
losses or operating loss carryovers of TSW International, Inc.  As a
result of the merger of TSW International, Inc., Indus International,
Inc. inherited net operating loss carryovers of approximately $18.7
million, or approximately $7.5 million in potential tax benefits.  In
1998, benefits of approximately $4.7 million were recognized, reducing
the provision for federal income taxes in that period.
 
Pro Forma Statement of Operations Data
 
                Pro forma net income data in 1996 excludes the $6.7 million
cumulative effect charge due to the termination of S Corporation status
by The Indus Group, Inc. on January 1, 1996.  The majority of the
cumulative effect charge is due to changing from the cash basis of
accounting as an S Corporation to the accrual basis of accounting as a C
Corporation.
 
Per Share Data
 
        Basic and diluted earnings per share have been calculated using
the weighted average common shares outstanding during the periods. The
average outstanding share numbers used prior to the Merger reflect the
average outstanding shares of each of the merged companies, as adjusted
for the effective exchange rates, and also the equivalent common shares
required for the redemption of the preferred stock of TSW International,
Inc.
 
        Common equivalent shares from stock options and warrants are
included in the diluted per share calculations unless their inclusion
would be antidilutive.
 
     The components of basic and diluted earnings per share were as follows (in
thousands, except per share amounts):
 
<TABLE>
<CAPTION>
                                                 Years ended December 31,
                                             -----------------------------
                                               1996      1997      1998
                                             --------- --------- ---------
<S>                                         <C>       <C>       <C>
Net income (*)                                 $5,825      $990   $13,415
                                             --------- --------- ---------
 
 
Weighted average shares of common stock
  outstanding ...............................  25,976    28,574    30,717
                                             --------- --------- ---------
Shares used in computing basic net income per
  share .....................................  25,976    28,574    30,717
                                             --------- --------- ---------
Basic net income per share (*)                   0.22      0.03      0.44
                                             --------- --------- ---------
Calculation of shares outstanding for
computing diluted net income per share:
  Shares used in computing basic net income
  per share                                    25,976    28,574    30,717
  Shares to reflect the effect of the assumed
  conversion of:
    Employee stock options ..................   1,500     3,353     2,091
    Warrants ................................   1,345     1,521     2,455
                                             --------- --------- ---------
Shares used in computing full-diluted net
income per share ............................  28,821    33,448    35,263
                                             --------- --------- ---------
Diluted net income per share (*)                 0.20      0.03      0.38
                                             --------- --------- ---------
</TABLE>
 
(*) Proforma per share data for 1996 is based on proforma net
income, which is exclusive of the $6.7 million cumulative deferred
income tax provision made upon conversion of The Indus Group, Inc.
to a C Corporation status.
 
Use of Estimates
 
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes.  Actual results could
differ from those estimates.
 
Stock Based Compensation
 
        Compensation costs for stock options granted to employees is
measured by the excess, if any, of the quoted market price of the
Company's stock at the date of grant over the amount an employee must
pay to acquire the stock.  Note 10 to the Consolidated Financial
Statements contains a summary of the pro forma effects to reported net
earnings (loss) and per share data for 1996, 1997 and 1998 as if the
Company had elected to recognize compensation cost based upon fair value
of options granted at grant date.
 
Recent Accounting Pronouncements
 
The Company adopted Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" ("SFAS 130") in 1998.
Other comprehensive income (primarily foreign currency translation
effects) and comprehensive income are shown in the Statement of
Stockholders' Equity.
 
The Company adopted Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS 131") in 1998.  SFAS 131
establishes annual and interim reporting standards for an enterprise's
operating segments and related disclosures about its products, services,
geographic areas and major customers.  The Company's operations are
treated as one operating segment.
 
AICPA Accounting Standards Executive Committee Statement of
Position 97-2, Software Revenue Recognition, ("SOP 97-2") and
Statement of Position 98-4 ("SOP 98-4"), Deferral of the Effective
Date of a Provision of SOP 97-2, Software Revenue Recognition or SOP 98-
4, which contain new rules for timing of recognition of software company
revenues, particularly as to license fee revenues where there are
multiple elements to be delivered under a contract or arrangement with a
customer, became effective for transactions beginning in 1998.
Management believes the Company's current policy and its practices
conform to the rules in these new accounting pronouncements.  Under the
Company's current policy, license fees on standard software products not
requiring substantial modification and customization are recognized as
revenue upon shipment to customers
 
In December 1998, the American Institute of Certified Public
Accountants or AICPA issued Statement of Position 98-9, Modification of
SOP 97-2, Software Revenue Recognition, With Respect Certain
Transactions, or SOP 98-9.  SOP 98-9 amends SOP 98-4 to extend the
deferral of the application of certain passages of SOP 97-2 provided by
SOP 98-4 through fiscal years beginning on or before March 15, 1999.
All other provisions of SOP 98-9 are effective for transactions entered
into in fiscal years beginning after March 15, 1999.  The Company has
not yet determined the effect of the final adoption of SOP 98-9 on its
future revenues and results of operations.
 
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 133,
Accounting for Derivative Financial Instruments and for Hedging
Activities", which provides a comprehensive and consistent standard for
the recognition and measurement of derivatives and hedging activities.
SFAS No. 133 is effective for years beginning after June 15, 1999 and is
not anticipated to have a significant impact on the Company's results of
operations or financial condition when adopted.
 
 
2.  Marketable Securities
 
         The following is a summary of marketable  securities,  all of which are
available for sale (in thousands):
<TABLE>
<CAPTION>
                                       Gross       Gross       Gross    Estimated
                                     Amortized  Unrealized  Unrealized     Fair
                                        Cost       Gains      Losses      Value
                                     ---------- ----------- ----------- ----------
<S>                                  <C>        <C>         <C>         <C>
December 31, 1997
-------------------
Municipal Obligations ............... $ 23,649        $ 24     $ --      $ 23,673
                                     ---------- ----------- ----------- ----------
                                      $ 23,649        $ 24     $ --      $ 23,673
                                     ========== =========== =========== ==========
Included in:
Cash and cash equivalents .........     $6,975     $ --        $ --        $6,975
Marketable securities-current .....     11,874           6       --        11,880
Marketable securities-non current .      4,800          18       --         4,818
                                     ---------- ----------- ----------- ----------
                                       $23,649         $24     $ --       $23,673
                                     ========== =========== =========== ==========
 
December 31, 1998
-------------------
Marketable securities - current .....   $6,100     $ --        $ --        $6,100
Certificates of deposit .............    4,000       --          --         4,000
Commercial Paper and corporate notes     8,983           8       --         8,991
Municipal Obligations ...............     --         --          --          --
                                     ---------- ----------- ----------- ----------
                                       $19,083   $   --      $   --       $19,091
                                     ========== =========== =========== ==========
Included in:
Cash and cash equivalents .........     $3,495       --          --        $3,495
Marketable securities-current .....     15,588       --          --        15,596
Marketable securities-non current .       --         --          --          --
                                     ---------- ----------- ----------- ----------
                                       $19,083     $ --        $ --       $19,091
                                     ========== =========== =========== ==========
</TABLE>
 
        There have been no significant realized gains or losses on sales
of marketable securities.
 
3.  Property and Equipment
 
         Property  and  equipment  is  recorded  at  cost  and  consists  of the
following (in thousands):
<TABLE>
<CAPTION>
                                                     December 31,
                                                -----------------------
                                                   1997        1998
                                                ----------- -----------
<S>                                             <C>         <C>
Furniture and fixtures .......................      $4,615      $4,895
Office equipment .............................      23,193      26,260
Leasehold improvements .......................       2,617       2,795
Internally used capitalized software .........       2,763       3,382
                                                ----------- -----------
                                                    33,188      37,332
Less accumulated depreciation and
amortization .................................      16,618      21,426
                                                ----------- -----------
                                                   $16,570     $15,906
                                                =========== ===========
</TABLE>
 
 
        Equipment leased under capital leases is included in property and
equipment.  At December 31, 1998 and 1997, equipment under capital
leases was $3,940,000 and $4,104,000, respectively, with accumulated
depreciation of $2,328,000 and $1,586,000, respectively.
 
4.  Other Accrued Liabilities
 
         Other accrued liabilities consists of the following (in thousands):
<TABLE>
<CAPTION>
                                                     December 31,
                                                -----------------------
                                                   1997        1998
                                                ----------- -----------
<S>                                             <C>         <C>
Accrued merger and restructuring .............      $1,898       --
Accrued commissions ..........................       3,089       2,527
Accrued payroll and related expenses .........       2,674       5,513
Accrued taxes payable ........................         600       1,489
Other accrued liabilities ....................       5,807       7,192
                                                ----------- -----------
                                                   $14,068     $16,721
                                                =========== ===========
</TABLE>
 
5.  Lines of Credit
 
        The Company has a revolving bank line of credit in the amount of
$35.0 million, which is secured by all of the Company's accounts
receivable.  The revolving credit facility expires on July 31, 1999 and
bears an interest rate of the one month LIBOR rate plus 1.5% (6.74% as
of December 31, 1998).  This facility replaced and eliminated The Indus
Group, Inc. and TSW International, Inc., revolving lines of credit,
which bore higher interest rates.  Borrowings outstanding under this
line of credit were $19.7 million at December 31, 1998 and $26.7 million
at December 31, 1997.  Stand-by letters of credit outstanding on this
line of credit were $0.6 million at both December 31, 1997 and 1998,
respectively.  The line of credit agreement contains certain affirmative
and negative covenants.  The Company was in compliance with these
financial covenants at December 31, 1998 and 1997.
 
6.  Related Party Transactions
 
        Immediately prior to the Merger, TSW International, Inc. had
subordinated long-term notes of $15,706,000 and accrued interest of
$4,075,000 that were payable to its principal stockholder.  The notes
bore an interest rate of prime plus 1.5% with varying maturity dates
from July 31, 1999 to October 13, 2000.  Pursuant to the Merger, the
outstanding subordinated floating rate notes of TSW International, Inc.
and accrued interest were exchanged for an aggregate of 1,235,879 common
shares of the Company.  Deferred issuance costs in connection with the
notes were written off as an extraordinary item in 1997.
 
        In 1997, TSW International, Inc. forgave two notes receivable from
two officers/stockholders totaling $457,000.  TSW International, Inc.
lent an additional $161,850 to the individuals for payment of taxes in
conjunction with the note forgiveness.
 
7.  Commitments
 
        The Company leases its office facilities under various operating
lease agreements.  The leases require monthly rental payments in varying
amounts through 2011. These leases also require the Company to pay all
property taxes, normal maintenance, and insurance on the leased
facilities.
 
         Total   rental   expense   under  these  leases  (in   thousands)   was
approximately $6,683, $5,215, and $6,831 for 1996, 1997 and 1998,  respectively.
Future minimum lease payments under all  non-cancelable  operating leases are as
follows (in thousands):
 
<TABLE>
<CAPTION>
                                                 Operating    Capital
Years Ending December 31,                         Leases      Leases
------------------------------------            ----------- -----------
<S>                                             <C>         <C>
     1999 ...................................       $5,607      $1,425
     2000 ...................................        5,102         237
     2001 ...................................        3,175          19
     2002 ...................................        2,419           4
     2003 ...................................        2,366       --
     Thereafter .............................        4,270       --
                                                ----------- -----------
Total minimum payments required .............      $22,939      $1,685
                                                ===========
Less amounts representing interest ..........                       73
                                                            -----------
Present value of future lease payments ......                   $1,612
Less current portion ........................                    1,355
                                                            -----------
Long term portion ...........................                     $257
                                                            ===========
</TABLE>
 
8.  Stockholders' Equity
 
   The following is a summary of the authorized and issued  preferred and common
Stock of Indus International, Inc:.
<TABLE>
<CAPTION>
                                                December 31, December 31,
                                                    1997         1998
                                                ------------ ------------
<S>                                             <C>          <C>
Preferred Stock
Authorized shares, $.001 par value per share ..  10,000,000   10,000,000
Issued and outstanding ........................       --           --
Amount ........................................       --           --
Common Stock
Authorized shares, $.001 par value per share .. 100,000,000  100,000,000
Issued and outstanding ........................  29,935,980   31,617,126
Amount ........................................      29,936       31,617
</TABLE>
 
        The Board of Directors is authorized, subject to any limitations
prescribed by Delaware law, to provide for the issuance of shares of
preferred stock in one or more series, to establish from time to time
the number of shares to be included in each such series, to fix the
powers, preferences and rights of the shares of each wholly unissued
series and any qualifications, limitations or restrictions thereon, and
to increase or decrease the number of shares of any such series (but
not below the number of shares of such series then outstanding),
without any further vote or action by the stockholders.  The Board of
Directors may authorize the issuance of preferred stock with voting or
conversion rights that could adversely affect the voting power of other
rights of the holders of common stock.  Thus, the issuance of preferred
stock may have the effect of delaying, deferring or preventing a change
in control of the Company.  The Company has no current plan to issue
any shares of preferred stock.
 
        In June 1995, The Indus Group, Inc. issued 162,622 shares of
common stock to several employees in exchange for notes aggregating
$109,626.  The notes will be forgiven over a five-year period provided
the note holders continue their employment with the Company.
Additional deferred compensation of $370,000 was recorded for the
difference between the notes and the deemed fair value of the shares at
the date of issuance.  The $479,626 total deferred compensation is
being amortized over the five-year period.
 
 In 1998, the Company loaned a then officer/stockholder $491,770 in
conjunction with the exercise of stock options.  The note is secured by
a pledge of 100,000 shares of the Company's stock.
 
 9.      Stock Plans
 
 Stock Option and Benefit Plans
 
        Upon consummation of the Merger, the stock option plans of The
Indus Group, Inc. and TSW International, Inc. terminated and each
outstanding option under the plans as well as any individual non-plan
options of TSW International, Inc. were assumed and converted into
options to purchase Indus International, Inc. common stock, at the
respective exchange rates in the Merger.
 
        The Company has three stock option plans under which employees,
directors and consultants may be granted rights to purchase common
stock.
 
 1997 Stock Plan
 
        The 1997 Stock Plan and Indus International Company Share
Option Plan (the "Stock Plan") provide for the grant of incentive or
nonstatutory stock options to employees, including officers and
directors, and nonstatutory options only to consultants of the Company.
A total of 7,000,000 shares have been reserved for issuance under the
Stock Plan.  The incentive stock options will be granted at not less
than fair market value of the stock on the date of grant.  The options
will generally vest over one to four years and have a maximum term of
ten years.
 
 1997 Director's Option Plan
 
        Each director who is not an employee of the Company is
automatically granted a nonstatutory stock option to purchase 10,000
shares of common stock of the Company (the "First Option") on the date
such person becomes a director or, if later, on the effective date of
the 1997 Director's Option Plan (the "Director Option Plan").
Thereafter, each such person will automatically be granted an option to
acquire 5,000 shares of the Company's Common Stock (the "Subsequent
Option") upon such outside director's re-election at each Annual Meeting
of Stockholders, provided that on such date such person has served on
the Board of Directors for at least six months.  A total of 200,000
shares has been reserved for issuance under the Director Option Plan.
Each option granted under the Director Option Plan will become
exercisable as to 25% of the Shares subject to such option on each
anniversary of its date of grant.
 
        The 1998 Indus International, Inc. Company Share Option Plan (the
"UK Stock Plan") provides for the grant of stock options to employees
of Indus International, Ltd. (a UK foreign subsidiary of the Company).
A total of 500,000 shares have been reserved for issuance under the
Stock Plan.  The stock options will be granted at not less than fair
market value of the stock on the date of grant.  The options will
generally vest over one to three years and have a maximum term of three
years.
 
         The activity under the option plans, combined, was as follows:
<TABLE>
<CAPTION>
                                                 Options Outstanding
                                  Shares    --------------------------------
                                 Available     Number
                                   for           of
                                   Grant       Shares       Price Per Share
------------------------------- ----------- ------------ -------------------
<S>                             <C>         <C>          <C>
Balances at December 31, 1995.   6,469,556    3,319,604    $0.28  -   $4.20
   Shares reserved ...........   1,600,000       --
   Options granted ...........  (2,925,942)   2,925,942    $3.38  -  $22.75
   Options forfeited .........       7,350       (7,350)   $0.28  -  $16.50
   Options exercised .........       --        (916,845)   $0.28  -   $0.69
                                ----------- ------------
Balances at December 31, 1996.   5,150,964    5,321,351    $0.28  -  $22.75
   Shares reserved ...........   8,400,000       --
   Options granted ...........  (4,396,604)   4,396,604    $3.94  -  $25.75
   Options forfeited .........     577,466     (577,466)   $0.28  -  $25.00
   Options exercised .........       --        (784,481)   $0.28  -  $15.00
   Plan shares expired .......  (8,027,326)      --
                                ----------- ------------
Balances at December 31, 1997.   1,704,500    8,356,008    $0.28  -  $25.75
   Shares reserved ...........   2,500,000       --
   Options granted ...........  (7,744,071)   7,744,071    $3.69  -  $10.38
   Options forfeited .........   5,511,630   (5,511,630)   $0.67  -  $25.75
   Options exercised .........       --      (1,506,678)   $0.28  -   $5.34
   Plan shares expired .......    (548,870)      --
                                ----------- ------------
Balances at December 31, 1998.   1,423,189    9,081,771    $0.28  -  $18.15
                                =========== ============
</TABLE>
 
        On December 11, 1998, the Company offered its employees a stock
option repricing program that allowed the employees to exchange on a one
for one share basis any options priced above the December 14, 1998
closing price of Indus International, Inc. stock, which was $4.56.  As a
result, approximately 4,051,696 options on 4,051,696 shares were
surrendered by eligible employees and exchanged for substitute options.
The repriced options are not exercisable before June 14, 1999.
 
1997 Employee Stock Purchase Plan
 
        The Company has an employee stock purchase plan under which
1,000,000 shares of common stock have been reserved for issuance.  The
plan allows for eligible employees to purchase stock at 85% of the lower
of the fair market value of the Company's common stock as of the first
day of each six-month offering period or the fair market value of the
stock at the end of the offering period.  The initial offering period
began November 1997.  Purchases are limited to 10% of each employee's
compensation.  Under the plan the Company issued 174,468 shares in 1998,
at prices ranging from $4.54 to $6.97 per share.
 
        Under a prior employee stock purchase plan of The Indus Group,
Inc. 71,309 and 39,101 shares were issued in 1996 and 1997,
respectively, at prices ranging from $12.75 to $17.21 per share.
 
10.  Alternative Method of Valuing Stock Options
 
        For employee stock options granted with exercise prices at or
above the existing market price and without any contingent feature as to
the optionee's ability to exercise (other than the passage of time as a
continuing employee), the Company records no compensation expense.
 
        The following pro forma data is based on an alternative in which
employee stock options granted after 1994 are valued at grant date
based on the Black-Scholes option pricing model, a model that was
developed to value options subject to an active trading market.
Although employee stock options are not subject to a trading market,
active or inactive, the pro forma disclosures that follow are required
by applicable accounting pronouncements.
 
       The Indus Group, Inc. estimated the fair value for these options
at the date of grant using the Black-Scholes option pricing model for
1996 and 1997 with the following weighted-average assumptions for 1996
and 1997, respectively:  risk-free interest rates of 5.75% and 6.43%,
dividend yields of 0%; volatility factors of the expected market price
of the company's stock of 0.75 and 0.60, and an expected life of the
options of four and six years.  TSW International, Inc. estimated the
fair value for these options at the date of grant using the minimum
value option pricing model for 1996 and the Black-Scholes option pricing
model for 1997, with the following weighted-average assumptions for 1996
and 1997, respectively:  risk-free interest rates of 6.15% and 6.43%,
dividend yields of 0%; volatility factors of the expected market price
of the company's stock of 0.0 and 0.60, and an expected life of the
options of five years for 1996 and 1997. Indus International, Inc. has
estimated the fair value for the options at the date of grant using the
Black-Scholes option pricing model, with the following weighted-average
assumptions for 1997 and 1998, respectively:  risk-free interest rate of
6.43% and 5.14%, dividend yields of 0%, volatility factor of the
expected market price of the company's stock of 0.60 and 0.70, and an
expected life of the options of six years for options granted under the
1997 Stock Plan and the 1997 Director's Option Plan and three years for
options granted under the 1998 Indus International, Inc. Company Share
Option Plan.
 
         For purposes of pro forma disclosures,  the estimated fair value of the
options is amortized to expense over the options' vesting period.  The Company's
pro forma  information  net  income  (loss)  including  pro  forma  compensation
expense,  net of tax for the  years  ended  December  31,  1996,  1997 and 1998,
respectively,  is as  follows  (in  thousands  except  for  earnings  per  share
information):
<TABLE>
<CAPTION>
                                             Year Ended December 31,
                                         -----------------------------
                                           1996      1997      1998
                                         --------- --------- ---------
<S>                                      <C>       <C>       <C>
Pro forma net income (loss)............    $5,740   ($1,546)  ($6,122)
Pro forma net income (loss) per share..     $0.22    ($0.05)   ($0.20)
Pro forma diluted net income (loss)
per share                                   $0.20    ($0.05)   ($0.17)
</TABLE>
 
 
         The  following  table  summarizes   information   about  stock  options
outstanding as of December 31, 1998.
<TABLE>
<CAPTION>
                                                         Options Vested and
                                                             Exercisable
                        Options Outstanding
                 -------------------------------- --------------------
                             Weighted-
                              Average   Weighted-            Weighted-
                             Remaining   Average              Average
   Range of      OutstandingContractual Exercise  ExercisableExercise
 Exercise Prices in shares     Life       Price   in shares    Price
---------------- ---------- ----------- --------- ---------- ---------
<S>              <C>        <C>         <C>       <C>        <C>
 $0.28 -  $0.67    463,305        4.54     $0.41    463,305     $0.41
 $1.00 -  $2.20    261,579        4.81      1.64    256,929      1.64
 $3.38 -  $4.50  1,416,158        7.98      3.53    804,987      3.46
 $4.56 -  $4.56  4,753,370        9.01      4.56     27,875      4.56
 $4.88 -  $8.50  1,855,672        9.39      8.24    223,070      8.12
$13.75 - $18.50    331,687        7.43     15.55    137,655     15.57
 
 
                 ---------- ----------- --------- ---------- ---------
Total            9,081,771        8.52      5.26  1,913,821      3.91
                 ========== =========== ========= ========== =========
</TABLE>
The weighted average fair value of options granted in 1996 and
1997 was $8.57 and $8.20, respectively.  In 1998, the weighted average
fair value of options granted under the UK Stock Plan was $3.58 and
under the remaining plans is $2.70, using these alternative methods of
valuation.
 
11.  Employee Benefit and Profit-Sharing Plans
 
        The Company has a defined contribution 401(K) plan.  All employees
over the age of 21 who have completed at least one-half year of service
are eligible to participate.  Each participant may elect to have
amounts deducted from his or her compensation and contributed to the
plan up to 15% of his or her base salary.  All contributions are fully
vested at the time the employee becomes an active participant.  The
Company did not contribute any matching funds in 1996 or 1997; in 1998,
the matching contribution was $847,281.
 
        The Company also has a profit sharing plan.  All employees over the
age of 21 who have completed at least one-half year of service are
eligible to participate.  Contributions to the plan are at the
discretion of the board of directors and are made to eligible
employees' individual accounts in proportion to their base salary.
Contribution expense related to the profit sharing plan for 1996 and
1997 was approximately $250,000 in each year.  The Company did not
contribute to the profit sharing plan in 1998.
 
12.  Geographic Information
 
Geographic information is as follows (in thousands):
<TABLE>
<CAPTION>
                                                  Year Ended December 31,
                                              -----------------------------
                                                1996      1997      1998
                                              --------- --------- ---------
<S>                                           <C>       <C>       <C>
Net sales (based on destination)
   United States ............................ $101,691  $135,763  $149,282
   International (including United States
   exports shown below):
     Europe .................................   16,891    14,668    19,491
     Asia ...................................    7,987     7,070       233
     Canada .................................   12,252    15,422    20,491
     Other ..................................    4,217     4,111     5,980
                                              --------- --------- ---------
Total International .........................   41,347    41,271    46,195
                                              --------- --------- ---------
   Total consolidated net sales ............. $143,038  $177,034  $195,477
                                              ========= ========= =========
Income from operations
   United States ............................  $56,377   $75,506   $78,105
   International:
     Europe .................................    9,364     8,158    10,179
     Asia ...................................    4,428     3,932      (392)
     Canada .................................    6,792     8,577    (3,109)
     Other ..................................    2,338     2,286     7,177
Corporate administrative and other expenses .  (64,738)  (88,306)  (77,159)
Interest and other expenses, net ............   (1,887)   (1,968)     (936)
                                              --------- --------- ---------
Total consolidated income (loss)
  before income taxes .......................  $12,674    $8,185   $13,865
                                              ========= ========= =========
Identifiable assets
   United States ............................ $100,105  $118,918  $124,373
   International:
     Europe .................................    8,834     5,490    13,261
     Asia ...................................    3,951     3,225       242
     Canada .................................    3,228     5,895     9,407
     Other ..................................    1,737     3,197     3,502
                                              --------- --------- ---------
Total consolidated identifiable assets ...... $117,855  $136,725  $150,785
                                              ========= ========= =========
United States export sales (reported
in international sales above)
     Europe .................................   $7,337    $3,201       --
     Asia ...................................    2,326       871       --
     Canada .................................   12,252    15,422       --
     Other ..................................    4,217     4,069     1,703
                                              --------- --------- ---------
Total consolidated export sales .............  $26,132   $23,563    $1,703
                                              ========= ========= =========
</TABLE>
 
        Due to the Merger, the Company has an increased international
presence and supports the majority of international sales through
foreign subsidiaries.
 
13.  Income Taxes
 
         The  provision  for  income  taxes consists of the following
(in thousands):
<TABLE>
<CAPTION>
                                                  Year Ended December 31,
                                              -----------------------------
                                                1996      1997      1998
                                              --------- --------- ---------
<S>                                           <C>       <C>       <C>
Current:
   Federal ...............................      $7,639    $7,993      $484
   State and foreign .....................       2,497     1,823       385
                                              --------- --------- ---------
                                                10,136     9,816       869
                                              --------- --------- ---------
 
Deferred:
   Federal ...............................      (2,522)   (3,057)      --
   State and foreign .....................        (765)     (351)     (419)
                                              --------- --------- ---------
                                                (3,287)   (3,408)     (419)
                                              --------- --------- ---------
                                                $6,849    $6,408      $450
                                              ========= ========= =========
</TABLE>
 
 
 
         The effective rate of the provision for income taxes  reconciles to the
amount  computed  by  applying  the  federal  statutory  rate to  income  before
provision for income taxes as follows:
<TABLE>
<CAPTION>
                                                       Percentage
                                                  Year Ended December 31,
                                              -----------------------------
                                                1996      1997      1998
                                              --------- --------- ---------
<S>                                           <C>       <C>       <C>
Federal statutory rate ...................        35.0 %    35.0 %    35.0 %
Merger expenses ..........................         --       41.1       --
State taxes, net of federal benefit ......         6.5       9.3       0.4
Foreign taxes ............................         2.3       3.7       --
FSC benefit ..............................        (2.3)     (1.5)     (2.1)
R&D credit ...............................        (1.1)     (4.8)      --
TSW net operating loss carryovers.........         8.6     (10.3)    (33.6)
Other ....................................         5.0       5.8       3.5
                                              --------- --------- ---------
                                                  54.0 %    78.3 %     3.2 %
                                              ========= ========= =========
</TABLE>
 
         The 1996, 1997, and 1998 current  federal  and  state tax
provisions  do not reflect the tax savings of $6,669,000, $3,479,000,
and  $294,000, respectively  resulting from  deductions  associated  with
the exercise of stock options by employees in 1996. This tax benefit has been
included in additional paid in capital.
 
         Deferred income taxes reflect the tax effects of temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes. Significant components of
the net deferred tax liability are as follows (in thousands):
<TABLE>
<CAPTION>
                                                             December 31,
                                                        -------------------
                                                          1997      1998
                                                        --------- ---------
<S>                                                     <C>       <C>
Deferred Tax Assets:
Accounts receivable allowances ......................       $804      $966
Tax over book depreciation...........................       (782)      341
Nondeductible accruals ..............................      2,100     2,362
Deferred licensing fee revenue ......................      4,641     1,723
Net operating loss carryforwards ....................      4,901     3,963
Research and other credit carryforwards .............      1,383     1,744
Foreign tax credits and losses ......................      1,216     2,045
                                                        --------- ---------
                                                          14,263    13,144
Valuation allowance .................................     (9,140)  (10,390)
                                                        --------- ---------
                                                           5,123     2,754
Deferred Tax Liabilities:
Conversion from cash to accrual basis of accounting .      5,542     2,754
                                                        --------- ---------
Net deferred tax liability ..........................       $419       --
                                                        ========= =========
</TABLE>
 
 
        As of December 31, 1998, the Company had federal net operating
loss carryforwards of approximately $10.2 million.  The net operating
loss carryforwards will expire beginning in 2010 through 2012, if not
utilized.  The Company also has domestic research and experimental tax
credits of approximately $0.72 million which expire in years 2010 to
2012 if not utilized; domestic and foreign tax credits of approximately
$0.84 million which expire in years 1998 through 2002 if not utilized;
and foreign net operating loss carryforwards of approximately $2.9
million which can be carried forward indefinitely.
 
        Due to the Company's limited earnings history, the net deferred
tax asset has been fully offset by a valuation allowance.
Approximately $2.95 million of the valuation allowance for deferred tax
assets relates to benefits of stock option deductions which, when
recognized, will be allocated directly to additional paid in capital.
 
14.  Litigation
 
    A customer of the Company has filed an American Arbitration
Association Demand for Arbitration that claims breach of contract
related to the purchase of the Company's software.  The Company
disputes this claim and intends to defend the action vigorously.  The
Company believes it has adequate legal defenses and that the ultimate
outcome of this action will not have a material effect on the Company's
financial position and results of operations.  However, the ultimate
outcome of any litigation is uncertain, and therefore an unfavorable
outcome could have a material negative impact on the Company.
 
 
 
 
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
 
        None.
 
 
                                    PART III
 
        Certain information required by Part III is omitted from this Report
in that the Registrant will file a definitive proxy statement pursuant
to Regulation 14(a)  (the "Proxy Statement") not later that 120 days
after the end of the fiscal year covered by this Report and certain
information included therein is incorporated herein by reference.  Only
those sections of the Proxy Statement that specifically address the
items set forth herein are incorporated by reference.  Such
incorporation does not include the Compensation Committee Report or the
Performance Graph included in the Proxy Statement.
 
 
ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
        The information concerning the Company's Directors required by this
Item is incorporated by reference to the information contained under the
captions "Election of Director-Nominees" and "Compliance with Section
16(a) of the Securities Exchange Act of 1934" in the Proxy Statement.
The information concerning the Company's officers required by this Item
is included in the Section in Part I hereof entitled "Executive
Officers".
 
 
ITEM 11.  EXECUTIVE COMPENSATION
 
        The information concerning the Company's Executive Officers required
by this Item is incorporated by reference to the information contained
under the captions "Proposal One - Election of Directors - Director
Compensation and Executive Compensation" in the Proxy Statement.
 
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
        The information concerning security ownership required by this Item
is incorporated by reference to the information contained under the
caption "Security Ownership of Management; Principal Stockholders" in
the Proxy Statement.
 
 
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
        The information required by this item is incorporated by reference
to the information contained under the caption "Certain Relationships
and Related Transactions" in the Proxy Statement.
 
                                     PART IV
 
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
 
(a) (1) Financial Statements
 
The Financial Statements required by this item, together with the
report of independent auditors, are filed as part of this Form 10-
K.  See Index to Consolidated Financial Statements under Item 8.
 
(2) Financial Statement Schedule
 
The following financial statement schedule of Indus International,
Inc. for the years ended December 31, 1998, 1997 and 1996 is filed
as part of this Report and should be read in conjunction with the
Consolidated Financial Statements of Indus International, Inc.
 
                Schedule II     Valuation and Qualifying Accounts
 
Schedules not listed above have been omitted because
they are not applicable or are not required or the information
required to be set forth therein is included in the Consolidated
Financial Statements or Notes thereto.
 
(3) Exhibits
 
The following exhibits are filed herewith or incorporated by
reference.
 
<TABLE>
<CAPTION>
  Exhibit
  Number                          Exhibit Description
-----------  -------------------------------------------------------------
<C>          <S>
       2.1   Agreement and Plan of Merger and Reorganization  dated as of June
             5, 1997 ("Agreement of Merger"), by and among the Registrant, The
             Indus Group, Inc. ("Indus") and TSW  International,  Inc. ("TSW")
             (incorporated  by  reference  to Appendix  A-1 to the Joint Proxy
             Statement/Prospectus  filed as part of the Registration Statement
             on Form S-4 (Reg.  No.  333-33113)  filed with the Securities and
             Exchange Commission on August 7, 1997 (the "Proxy Statement"))
 
       2.2   First  Amendment to Agreement of Merger dated as of July 21, 1997
             by and  among the  Registrant,  Indus  and TSW  (incorporated  by
             reference to Exhibit 2.2 to the Proxy Statement)
 
       2.3   Form of  Agreement  of Merger to be entered into by and among the
             Registrant,  Indus Sub, Inc. and Indus (incorporated by reference
             to Appendix A-2 to the Proxy Statement)
 
       2.4   Form of  Agreement  of Merger to be entered into by and among the
             Registrant,  TSW Sub, Inc. and TSW  (incorporated by reference to
             Appendix A-3 to the Proxy Statement)
 
       3.1   Registrant's    Certificate   of   Incorporation,    as   amended
             (incorporated by reference to Exhibit 3.1 to the Proxy Statement)
 
       3.2   Registrant's Bylaws  (incorporated by reference to Exhibit 3.2 to
             the Proxy Statement)
 
       4.1   Form of  Registration  Rights  Agreement  entered  into among the
             Registrant,  Warburg, Pincus Investors, LP ("Warburg"), Robert W.
             Felton,  Richard  W.  MacAlmon,  John W.  Blend,  III and John R.
             Oltman  (incorporated  by  reference  to Exhibit 4.1 to the Proxy
             Statement)
 
       4.2   Form of  Indus  Affiliate  Agreement  dated  as of  June 5,  1997
             entered into by the Registrant,  Indus, TSW and each of Robert W.
             Felton,  Richard W. MacAlmon,  Michael E. Percy,  Alan G. Merten,
             Donald F.  Robertson,  Douglas R. Piper,  Frank M.  Siskowski and
             Edward R. Koepfler  (incorporated  by reference to Exhibit 4.2 to
             the Proxy Statement)
 
       4.3   Form of TSW Affiliate  Agreement dated as of June 5, 1997 entered
             into  by  the  Registrant,   Indus,  TSW  and  each  of  Warburg,
             Christopher R. Lane, John F. Bartels, John W. Blend, III, Kenneth
             C. Colby, Jr., David J. Loesch,  Allen D. Vaughn, John R. Oltman,
             George  D.  Busbee,  William  H.  Janeway  and  Joseph  P.  Landy
             (incorporated by reference to Exhibit 4.3 to the Proxy Statement)
 
       4.4   Felton Affiliate  Agreement dated as of June 5, 1997 entered into
             among  the   Registrant,   Indus,   TSW  and  Robert  W.   Felton
             (incorporated by reference to Exhibit 4.4 to the Proxy Statement)
 
       4.5   Warburg Affiliate Agreement dated as of June 5, 1997 entered into
             among the Registrant,  Indus,  TSW and Warburg  (incorporated  by
             reference to Exhibit 4.5 to the Proxy Statement)
 
       4.6   Nomination  Agreement entered into among the Registrant,  Warburg
             and Robert W. Felton (incorporated by reference to Exhibit 4.6 to
             the Proxy Statement)
 
       4.7   Specimen  certificate for Registrant's Common Stock (incorporated
             by reference to Exhibit 4.7 to the Proxy Statement)
 
       9.1   Indus  Voting  Agreement  dated as of June 5, 1997  entered  into
             among TSW,  Robert W.  Felton,  Richard W.  MacAlmon,  Michael E.
             Percy and Douglas R. Piper  (incorporated by reference to Exhibit
             9.1 to the Proxy Statement)
 
       9.2   TSW Voting  Agreement dated as of June 5, 1997 entered into among
             the Registrant,  Indus,  Warburg,  John W. Blend, III and John R.
             Oltman  (incorporated  by  reference  to Exhibit 9.2 to the Proxy
             Statement)
 
      10.1 * Indus  International,  Inc.  1997  Stock  Plan  (incorporated  by
             reference to Exhibit 10.1 to the Proxy Statement)
 
      10.2 * Indus  International,  Inc.  1997  Employee  Stock  Purchase Plan
             (incorporated   by   reference  to  Exhibit  10.2  to  the  Proxy
             Statement)
 
      10.3 * Indus International, Inc. 1997 Director Option Plan (incorporated
             by reference to Exhibit 10.3 to the Proxy Statement)
 
      10.4   Form of Tax  Indemnification  Agreement of Indus (incorporated by
             reference  to Exhibit  10.6 to Indus'  Registration  Statement on
             Form S-1 (File No. 33-80573)  declared  effective on February 26,
             1996, as amended (the "Indus Form S-1"))
 
      10.5   Software  Master  License  Agreement  between  Indus  and  Felton
             Enterprises,   dated   January  2,  1990,   as  amended  to  date
             (incorporated  herein by  reference  to Exhibit 10.7 to the Indus
             Form S-1)
 
      10.6   Conditional  Assignment of Software Master License  Agreement and
             Underlying  Software between Indus and Felton  Enterprises  dated
             February  24, 1996  (incorporated  herein by reference to Exhibit
             10.8 to the Indus Form S-1)
 
      10.7   Amended and Restated  Commercial  Loan  Agreement  dated June 30,
             1995 between  Indus and Sumitomo Bank of  California,  as amended
             through  December 19, 1995  (incorporated  herein by reference to
             Exhibit 10.9 to the Indus Form S-1)
 
      10.8   Third  Amendment to Commercial  Loan Agreement dated May 29, 1996
             between  Indus  and  Sumitomo  Bank of  California  (incorporated
             herein by reference to Exhibit 10.1 to the Indus Quarterly Report
             on Form 10-Q (File No.  0-27806)  filed with the  Securities  and
             Exchange Commission on August 13, 1996)
 
      10.9   Fourth  Amendment to Commercial Loan Agreement dated September 6,
             1996 between Indus and Sumitomo Bank of California  (incorporated
             herein by reference to Exhibit 10.1 to the Indus Quarterly Report
             on Form 10-Q (File No.  0-27806)  filed with the  Securities  and
             Exchange Commission on November 13, 1996)
 
     10.10   Asset    Acquisition    Agreement   between   Indus   and   Indus
             International,  Inc. (incorporated herein by reference to Exhibit
             10.10 to Amendment No. 3 to the Company's  Registration Statement
             on Form S-1 (Reg.  No.  33-80573)  filed with the  Securities and
             Exchange Commission on February 28, 1996)
 
     10.11   Lease for Indus' San Francisco, CA headquarters dated January 24,
             1990,  as amended  (incorporated  herein by  reference to Exhibit
             10.11 to the Indus Form S-1)
 
     10.12   Lease for Indus' Pittsburgh, PA sales office (incorporated herein
             by reference to Exhibit 10.12 to Amendment No. 1 to the Company's
             Registration Statement on Form S-1 (Reg. No. 33-80574) filed with
             the Securities and Exchange Commission on January 31, 1996)
 
     10.13   Loan and Security  Agreement  dated November 17, 1995 between TSW
             and  Greyrock  Business  Credit,  a division of Greyrock  Capital
             Group Inc.  ("Greyrock")  (incorporated  by  reference to Exhibit
             10.13 to the Proxy Statement)
 
     10.14   Patent and Trademark  Security  Agreement dated November 17, 1995
             between TSW and  Greyrock  (incorporated  by reference to Exhibit
             10.14 to the Proxy Statement)
 
     10.15   Security  Agreement in Copyrighted  Works dated February 28, 1996
             between TSW and  Greyrock  (incorporated  by reference to Exhibit
             10.15 to the Proxy Statement)
 
     10.16   Amendment to Loan  Documents,  dated August 1, 1996,  between TSW
             and Greyrock  (incorporated  by reference to Exhibit 10.16 to the
             Proxy Statement)
 
     10.17   Secured  Promissory  Note dated  August 1, 1996  between  TSW and
             Greyrock (incorporated by reference to Exhibit 10.17 to the Proxy
             Statement)
 
     10.18   Guarantee  dated  November  6,  1996  between  TSW  International
             Limited and Greyrock  (incorporated by reference to Exhibit 10.18
             to the Proxy Statement)
 
     10.19   Deed of Guarantee and Indemnity  dated  November 14, 1996 between
             TSW and  International  Pty Ltd.  and Greyrock  (incorporated  by
             reference to Exhibit 10.19 to the Proxy Statement)
 
     10.20   Second  Amendment to Loan  Documents  dated April 3, 1997 between
             TSW and Greyrock  (incorporated  by reference to Exhibit 10.20 to
             the Proxy Statement)
 
     10.21   Securities  Purchase Agreement dated as of June 20, 1994, between
             TSW and Warburg, Pincus Investors,  LP ("Warburg")  (incorporated
             by reference to Exhibit 10.21 to the Proxy Statement)
 
     10.22   Amended and Restated  Stockholders  Agreement dated June 20, 1994
             between TSW,  Warburg,  John W. Blend, III ("Blend") and David P.
             Welden  (incorporated  by reference to Exhibit 10.22 to the Proxy
             Statement)
 
     10.23   Stockholder's  Rights  Agreement  dated  as of  August  30,  1994
             between TSW, Warburg and Alan Johnston (incorporated by reference
             to Exhibit 10.23 to the Proxy Statement)
 
     10.24   Form of  Stock  Purchase  Warrant  between  TSW and  Warburg  and
             schedule of  substantially  similar  Agreements  (incorporated by
             reference to Exhibit 10.24 to the Proxy Statement)
 
     10.25   Form of Subordinated Floating Rate Note payable by TSW to Warburg
             and schedule of substantially similar agreements (incorporated by
             reference to Exhibit 10.25 to the Proxy Statement)
 
     10.26 * Employment   Agreement  dated  July  19,  1994  between  TSW  and
             Christopher  R.  Lane  ("Lane")  (incorporated  by  reference  to
             Exhibit 10.26 to the Proxy Statement)
 
     10.27   Loan  Agreement  dated  December  22,  1996  between TSW and Lane
             (incorporated   by  reference  to  Exhibit  10.27  to  the  Proxy
             Statement)
 
     10.28   Supplemental  Severance Agreement dated December 15, 1994 between
             TSW and Lane  (incorporated  by reference to Exhibit 10.28 to the
             Proxy Statement)
 
     10.29   Promissory  Note dated  December  22,  1996  between TSW and Lane
             (incorporated   by  reference  to  Exhibit  10.29  to  the  Proxy
             Statement)
 
     10.30   Collateral  Assignment  Agreement dated December 22, 1996 between
             TSW and Lane  (incorporated  by reference to Exhibit 10.30 to the
             Proxy Statement)
 
     10.31   Nonrecourse  Loan Agreement  dated September 16, 1992 between TSW
             and Blend  (incorporated  by  reference  to Exhibit  10.31 to the
             Proxy Statement)
 
     10.32   Stock Pledge  Agreement  dated September 16, 1992 between TSW and
             Blend  (incorporated  by reference to Exhibit  10.32 to the Proxy
             Statement)
 
     10.33   Collateral  Assignment  and  Agreement  dated  September 16, 1992
             between TSW and Blend (incorporated by reference to Exhibit 10.33
             to the Proxy Statement)
 
     10.34   Nonrecourse  Promissory Note dated September 16, 1992 between TSW
             and Blend  (incorporated  by  reference  to Exhibit  10.34 to the
             Proxy Statement)
 
     10.35   Lease  Agreement  dated  June 8,  1993  between  TSW and  Cousins
             Properties Incorporated, as amended (incorporated by reference to
             Exhibit 10.35 to the Proxy Statement)
 
     10.36   Credit  Agreement  dated  September  2, 1997 (as amended  through
             First  Amendment  dated September 16, 1997) with Sumitomo Bank of
             California and Union Bank of California,  N.A.  (incorporated  by
             reference to Exhibit 10.01 to the  Registrant's  Quarterly Report
             on Form 10-Q (File No.  0-22993)  filed with the  Securities  and
             Exchange Commission on November 14, 1997)
 
     10.37   Stock Purchase Agreement dated January 13, 1999 between Robert W.
             Felton, Warburg Pincus Investors, L.P. and Indus International, Inc.
 
      13.1   Portions of the Registrant's Annual Report
 
      21.1   Subsidiaries of Registrant
 
      23.1   Consent of Ernst & Young LLP, Independent Auditors
 
      24.1   Power of Attorney, filed on page 24 of this report.
 
      27.1   Financial Data Schedule
</TABLE>
 
-----------
*    Designates management contract or compensatory plan or arrangement.
 
(b)  Reports on Forms 8-K.
 
        The following reports on Form 8-K were filed during the fourth
quarter of the fiscal year ended December 31, 1998.
 
                Form 8K reporting Item 5 (dated October 16, 1998) was filed
November 2, 1998.
 
<PAGE>
 
                                  SIGNATURES
Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934, Indus International,  Inc. has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
 
 
                                              INDUS INTERNATIONAL, INC.
 
                                              /s/ William J. Grabske
                                              --------------------
                                              William J. Grabske
                                              Chairman of the Board
                                              of Directors, President
                                              and Chief Executive Officer
 
                                              Date:  March 29, 1998
 
 
                                 POWER OF ATTORNEY
 
KNOW ALL PERSONS BY THESE  PRESENT,  that each person  whose  signature  appears
below constitutes and appoints William J. Grabske  and Albert J. Wood,  jointly
and severally,  his/her attorneys-in-fact,  each with the power of substitution,
for him/her in any and all capacities,  to sign any amendments to this Report on
Form 10-K, and to file the same,  with exhibits  thereto and other  documents in
connection  therewith  with  the  Securities  and  Exchange  Commission,  hereby
ratifying and  confirming  all that each of said  attorneys-in-fact,  or his/her
substitute or substitutes may do or cause to be done by virtue hereof.
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
 
         Signature                         Title                      Date
---------------------------  ----------------------------------  --------------
<S>                          <C>                                 <C>
 /s/ William J. Grabske      Chairman of the Board of Directors, March 29, 1999
---------------------------  President and Chief Executive Officer
    (William J. Grabske)     Principal Executive Officer
 
 
 /s/ Albert J. Wood          Vice President of Finance and       March 29, 1999
---------------------------  Treasurer, Principal Financial and
    (Albert J. Wood)         Accounting Officer
 
 
 /s/ Robert W. Felton        Director                            March 29, 1999
---------------------------
    (Robert W. Felton)
 
 
 /s/ William H. Janeway      Director                            March 29, 1999
---------------------------
    (William H. Janeway)
 
 
 /s/ Joseph P. Landy         Director                            March 29, 1999
---------------------------
    (Joseph P. Landy)
 
 
 /s/ Jeanne D. Wohlers       Director                            March 29, 1999
---------------------------
    (Jeanne D. Wohlers)
</TABLE>
<PAGE>
 
                                  EXHIBIT INDEX
 
<TABLE>
<CAPTION>
  Exhibit
  Number                          Exhibit Description
-----------  -------------------------------------------------------------
<C>          <S>
       2.1   Agreement and Plan of Merger and Reorganization  dated as of June
             5, 1997 ("Agreement of Merger"), by and among the Registrant, The
             Indus Group, Inc. ("Indus") and TSW  International,  Inc. ("TSW")
             (incorporated  by  reference  to Appendix  A-1 to the Joint Proxy
             Statement/Prospectus  filed as part of the Registration Statement
             on Form S-4 (Reg.  No.  333-33113)  filed with the Securities and
             Exchange Commission on August 7, 1997 (the "Proxy Statement"))
 
       2.2   First  Amendment to Agreement of Merger dated as of July 21, 1997
             by and  among the  Registrant,  Indus  and TSW  (incorporated  by
             reference to Exhibit 2.2 to the Proxy Statement)
 
       2.3   Form of  Agreement  of Merger to be entered into by and among the
             Registrant,  Indus Sub, Inc. and Indus (incorporated by reference
             to Appendix A-2 to the Proxy Statement)
 
       2.4   Form of  Agreement  of Merger to be entered into by and among the
             Registrant,  TSW Sub, Inc. and TSW  (incorporated by reference to
             Appendix A-3 to the Proxy Statement)
 
       3.1   Registrant's    Certificate   of   Incorporation,    as   amended
             (incorporated by reference to Exhibit 3.1 to the Proxy Statement)
 
       3.2   Registrant's Bylaws  (incorporated by reference to Exhibit 3.2 to
             the Proxy Statement)
 
       4.1   Form of  Registration  Rights  Agreement  entered  into among the
             Registrant,  Warburg, Pincus Investors, LP ("Warburg"), Robert W.
             Felton,  Richard  W.  MacAlmon,  John W.  Blend,  III and John R.
             Oltman  (incorporated  by  reference  to Exhibit 4.1 to the Proxy
             Statement)
 
       4.2   Form of  Indus  Affiliate  Agreement  dated  as of  June 5,  1997
             entered into by the Registrant,  Indus, TSW and each of Robert W.
             Felton,  Richard W. MacAlmon,  Michael E. Percy,  Alan G. Merten,
             Donald F.  Robertson,  Douglas R. Piper,  Frank M.  Siskowski and
             Edward R. Koepfler  (incorporated  by reference to Exhibit 4.2 to
             the Proxy Statement)
 
       4.3   Form of TSW Affiliate  Agreement dated as of June 5, 1997 entered
             into  by  the  Registrant,   Indus,  TSW  and  each  of  Warburg,
             Christopher R. Lane, John F. Bartels, John W. Blend, III, Kenneth
             C. Colby, Jr., David J. Loesch,  Allen D. Vaughn, John R. Oltman,
             George  D.  Busbee,  William  H.  Janeway  and  Joseph  P.  Landy
             (incorporated by reference to Exhibit 4.3 to the Proxy Statement)
 
       4.4   Felton Affiliate  Agreement dated as of June 5, 1997 entered into
             among  the   Registrant,   Indus,   TSW  and  Robert  W.   Felton
             (incorporated by reference to Exhibit 4.4 to the Proxy Statement)
 
       4.5   Warburg Affiliate Agreement dated as of June 5, 1997 entered into
             among the Registrant,  Indus,  TSW and Warburg  (incorporated  by
             reference to Exhibit 4.5 to the Proxy Statement)
 
       4.6   Nomination  Agreement entered into among the Registrant,  Warburg
             and Robert W. Felton (incorporated by reference to Exhibit 4.6 to
             the Proxy Statement)
 
       4.7   Specimen  certificate for Registrant's Common Stock (incorporated
             by reference to Exhibit 4.7 to the Proxy Statement)
 
       9.1   Indus  Voting  Agreement  dated as of June 5, 1997  entered  into
             among TSW,  Robert W.  Felton,  Richard W.  MacAlmon,  Michael E.
             Percy and Douglas R. Piper  (incorporated by reference to Exhibit
             9.1 to the Proxy Statement)
 
       9.2   TSW Voting  Agreement dated as of June 5, 1997 entered into among
             the Registrant,  Indus,  Warburg,  John W. Blend, III and John R.
             Oltman  (incorporated  by  reference  to Exhibit 9.2 to the Proxy
             Statement)
 
      10.1 * Indus  International,  Inc.  1997  Stock  Plan  (incorporated  by
             reference to Exhibit 10.1 to the Proxy Statement)
 
      10.2 * Indus  International,  Inc.  1997  Employee  Stock  Purchase Plan
             (incorporated   by   reference  to  Exhibit  10.2  to  the  Proxy
             Statement)
 
      10.3 * Indus International, Inc. 1997 Director Option Plan (incorporated
             by reference to Exhibit 10.3 to the Proxy Statement)
 
      10.4   Form of Tax  Indemnification  Agreement of Indus (incorporated by
             reference  to Exhibit  10.6 to Indus'  Registration  Statement on
             Form S-1 (File No. 33-80573)  declared  effective on February 26,
             1996, as amended (the "Indus Form S-1"))
 
      10.5   Software  Master  License  Agreement  between  Indus  and  Felton
             Enterprises,   dated   January  2,  1990,   as  amended  to  date
             (incorporated  herein by  reference  to Exhibit 10.7 to the Indus
             Form S-1)
 
      10.6   Conditional  Assignment of Software Master License  Agreement and
             Underlying  Software between Indus and Felton  Enterprises  dated
             February  24, 1996  (incorporated  herein by reference to Exhibit
             10.8 to the Indus Form S-1)
 
      10.7   Amended and Restated  Commercial  Loan  Agreement  dated June 30,
             1995 between  Indus and Sumitomo Bank of  California,  as amended
             through  December 19, 1995  (incorporated  herein by reference to
             Exhibit 10.9 to the Indus Form S-1)
 
      10.8   Third  Amendment to Commercial  Loan Agreement dated May 29, 1996
             between  Indus  and  Sumitomo  Bank of  California  (incorporated
             herein by reference to Exhibit 10.1 to the Indus Quarterly Report
             on Form 10-Q (File No.  0-27806)  filed with the  Securities  and
             Exchange Commission on August 13, 1996)
 
      10.9   Fourth  Amendment to Commercial Loan Agreement dated September 6,
             1996 between Indus and Sumitomo Bank of California  (incorporated
             herein by reference to Exhibit 10.1 to the Indus Quarterly Report
             on Form 10-Q (File No.  0-27806)  filed with the  Securities  and
             Exchange Commission on November 13, 1996)
 
     10.10   Asset    Acquisition    Agreement   between   Indus   and   Indus
             International,  Inc. (incorporated herein by reference to Exhibit
             10.10 to Amendment No. 3 to the Company's  Registration Statement
             on Form S-1 (Reg.  No.  33-80573)  filed with the  Securities and
             Exchange Commission on February 28, 1996)
 
     10.11   Lease for Indus' San Francisco, CA headquarters dated January 24,
             1990,  as amended  (incorporated  herein by  reference to Exhibit
             10.11 to the Indus Form S-1)
 
     10.12   Lease for Indus' Pittsburgh, PA sales office (incorporated herein
             by reference to Exhibit 10.12 to Amendment No. 1 to the Company's
             Registration Statement on Form S-1 (Reg. No. 33-80574) filed with
             the Securities and Exchange Commission on January 31, 1996)
 
     10.13   Loan and Security  Agreement  dated November 17, 1995 between TSW
             and  Greyrock  Business  Credit,  a division of Greyrock  Capital
             Group Inc.  ("Greyrock")  (incorporated  by  reference to Exhibit
             10.13 to the Proxy Statement)
 
     10.14   Patent and Trademark  Security  Agreement dated November 17, 1995
             between TSW and  Greyrock  (incorporated  by reference to Exhibit
             10.14 to the Proxy Statement)
 
     10.15   Security  Agreement in Copyrighted  Works dated February 28, 1996
             between TSW and  Greyrock  (incorporated  by reference to Exhibit
             10.15 to the Proxy Statement)
 
     10.16   Amendment to Loan  Documents,  dated August 1, 1996,  between TSW
             and Greyrock  (incorporated  by reference to Exhibit 10.16 to the
             Proxy Statement)
 
     10.17   Secured  Promissory  Note dated  August 1, 1996  between  TSW and
             Greyrock (incorporated by reference to Exhibit 10.17 to the Proxy
             Statement)
 
     10.18   Guarantee  dated  November  6,  1996  between  TSW  International
             Limited and Greyrock  (incorporated by reference to Exhibit 10.18
             to the Proxy Statement)
 
     10.19   Deed of Guarantee and Indemnity  dated  November 14, 1996 between
             TSW and  International  Pty Ltd.  and Greyrock  (incorporated  by
             reference to Exhibit 10.19 to the Proxy Statement)
 
     10.20   Second  Amendment to Loan  Documents  dated April 3, 1997 between
             TSW and Greyrock  (incorporated  by reference to Exhibit 10.20 to
             the Proxy Statement)
 
     10.21   Securities  Purchase Agreement dated as of June 20, 1994, between
             TSW and Warburg, Pincus Investors,  LP ("Warburg")  (incorporated
             by reference to Exhibit 10.21 to the Proxy Statement)
 
     10.22   Amended and Restated  Stockholders  Agreement dated June 20, 1994
             between TSW,  Warburg,  John W. Blend, III ("Blend") and David P.
             Welden  (incorporated  by reference to Exhibit 10.22 to the Proxy
             Statement)
 
     10.23   Stockholder's  Rights  Agreement  dated  as of  August  30,  1994
             between TSW, Warburg and Alan Johnston (incorporated by reference
             to Exhibit 10.23 to the Proxy Statement)
 
     10.24   Form of  Stock  Purchase  Warrant  between  TSW and  Warburg  and
             schedule of  substantially  similar  Agreements  (incorporated by
             reference to Exhibit 10.24 to the Proxy Statement)
 
     10.25   Form of Subordinated Floating Rate Note payable by TSW to Warburg
             and schedule of substantially similar agreements (incorporated by
             reference to Exhibit 10.25 to the Proxy Statement)
 
     10.26 * Employment   Agreement  dated  July  19,  1994  between  TSW  and
             Christopher  R.  Lane  ("Lane")  (incorporated  by  reference  to
             Exhibit 10.26 to the Proxy Statement)
 
     10.27   Loan  Agreement  dated  December  22,  1996  between TSW and Lane
             (incorporated   by  reference  to  Exhibit  10.27  to  the  Proxy
             Statement)
 
     10.28   Supplemental  Severance Agreement dated December 15, 1994 between
             TSW and Lane  (incorporated  by reference to Exhibit 10.28 to the
             Proxy Statement)
 
     10.29   Promissory  Note dated  December  22,  1996  between TSW and Lane
             (incorporated   by  reference  to  Exhibit  10.29  to  the  Proxy
             Statement)
 
     10.30   Collateral  Assignment  Agreement dated December 22, 1996 between
             TSW and Lane  (incorporated  by reference to Exhibit 10.30 to the
             Proxy Statement)
 
     10.31   Nonrecourse  Loan Agreement  dated September 16, 1992 between TSW
             and Blend  (incorporated  by  reference  to Exhibit  10.31 to the
             Proxy Statement)
 
     10.32   Stock Pledge  Agreement  dated September 16, 1992 between TSW and
             Blend  (incorporated  by reference to Exhibit  10.32 to the Proxy
             Statement)
 
     10.33   Collateral  Assignment  and  Agreement  dated  September 16, 1992
             between TSW and Blend (incorporated by reference to Exhibit 10.33
             to the Proxy Statement)
 
     10.34   Nonrecourse  Promissory Note dated September 16, 1992 between TSW
             and Blend  (incorporated  by  reference  to Exhibit  10.34 to the
             Proxy Statement)
 
     10.35   Lease  Agreement  dated  June 8,  1993  between  TSW and  Cousins
             Properties Incorporated, as amended (incorporated by reference to
             Exhibit 10.35 to the Proxy Statement)
 
     10.36   Credit  Agreement  dated  September  2, 1997 (as amended  through
             First  Amendment  dated September 16, 1997) with Sumitomo Bank of
             California and Union Bank of California,  N.A.  (incorporated  by
             reference to Exhibit 10.01 to the  Registrant's  Quarterly Report
             on Form 10-Q (File No.  0-22993)  filed with the  Securities  and
             Exchange Commission on November 14, 1997)
 
     10.37   Stock Purchase Agreement dated January 13, 1999 between Robert W.
             Felton, Warburg Pincus Investors, L.P. and Indus International, Inc.
 
      13.1   Portions of the Registrant's Annual Report
 
      21.1   Subsidiaries of Registrant
 
      23.1   Consent of Ernst & Young LLP, Independent Auditors
 
      24.1   Power of Attorney, filed on page 24 of this report.
 
      27.1   Financial Data Schedule
</TABLE>
 
-----------
*    Designates management contract or compensatory plan or arrangement.
 
 
 
 
                                 INDUS INTERNATIONAL, INC.
 
                                        SCHEDULE II
                             VALUATION AND QUALIFYING ACCOUNTS
 
                                  (Amounts in thousands)
 
<TABLE>
<CAPTION>
                                                 Charged to
                            Balance at Charged to  Other   Charges- AddBalance at
                            Beginning  Costs and Account-   (Deduct)-    Ending
Year        Description     of Period  Expenses  Describe  Describe (1)of Period
----------- --------------- ---------- --------- --------- ----------- ----------
<S>         <C>             <C>        <C>       <C>                   <C>
            Allowance for
1998        doubtful amounts   $1,974    $2,130      --         ($526)    $3,578
 
1997        Allowance for
            doubtful amounts    1,247       945      --          (218)     1,974
 
1996        Allowance for
            doubtful amounts    1,238       573      --          (564)     1,247
</TABLE>