INFORMATION ADVANTAGE INC, 10-K, 1999-04-30

INFORMATION ADVANTAGE INC
10-K, 1999-04-30
PREPACKAGED SOFTWARE

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------
FORM 10-K

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED JANUARY 31, 1999

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

COMMISSION FILE NUMBER 0-23475

INFORMATION ADVANTAGE, INC.
(Exact Name of Registrant as Specified in Its Charter)

DELAWARE 41-1718445
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)

7905 GOLDEN TRIANGLE DRIVE, SUITE 190
EDEN PRAIRIE, MINNESOTA 55344-7227
(Address of Principal Executive Offices, including Zip Code)

(612) 833-3700
(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 ($0.01 PAR VALUE)
PREFERRED STOCK PURCHASE RIGHTS

Check 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 / /

Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-K contained in this form, and no disclosure will 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. / /

The aggregate market value of the voting common equity held by
non-affiliates of the registrant as of March 31, 1999 was approximately
$114,000,000.

The number of shares of the common stock of the registrant outstanding as
of March 31, 1999 was 25,022,259.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Annual Meeting of Stockholders to
be held on June 22, 1999 are incorporated by reference into Part III of this
Form 10-K.

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TABLE OF CONTENTS

Page
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PART I ..................................................................................... 1

ITEM 1 BUSINESS ..................................................................... 1
ITEM 2 PROPERTIES ................................................................... 11
ITEM 3 LEGAL PROCEEDINGS............................................................. 11
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........................... 12

PART II .................................................................................... 12

ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS........................................................... 12
ITEM 6 SELECTED FINANCIAL DATA....................................................... 12
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS......................................................... 14
CAUTIONARY STATEMENT.......................................................... 18
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK .................................................................. 29
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................................... 30
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.......................................................... 50

PART III ................................................................................... 50

ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ........................... 50
ITEM 11 EXECUTIVE COMPENSATION........................................................ 50
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ............... 50
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ............................... 51

PART IV .................................................................................... 51

ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K ............. 51

SIGNATURES ................................................................................. 53

INDEX TO EXHIBITS .......................................................................... 54

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PART I

ITEM 1 BUSINESS

The following description of the Company's business should be read in
conjunction with the information included elsewhere in this Annual Report. This
description contains certain forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ significantly from the
results discussed in the forward-looking statements as a result of certain of
the factors set forth below and elsewhere in this Annual Report.

Note that throughout this Annual Report, dollar amounts are expressed
in thousands, except per share data, unless otherwise specified.

OVERVIEW

Information Advantage, Inc. ("IA" or the "Company") develops, markets
and supports a comprehensive suite of enterprise scalable Business Intelligence
software. MyEureka!, the Company's Internet-based Business Intelligence
solution, combines the industry's first Business Intelligence portal with
powerful, robust and flexible reporting and analysis capabilities to provide
easy access to all business information and transform raw data into meaningful
information. MyEureka! enables organizations to leverage e-commerce activities
and become closer to their customers at all levels, thereby creating an
"intelligent enterprise," capable of quickly identifying and reacting to market
opportunities. MyEureka! supports UNIX and Windows NT operating systems,
includes an extensive and configurable set of Business Intelligence components
for information access, analysis and distribution, and is based on a secure and
scalable architecture.

INDUSTRY BACKGROUND

In order to compete effectively in today's global and e-commerce
environment, businesses must quickly identify and respond to changing market
conditions and are, therefore, dependent upon their ability to rapidly collect,
organize, access and analyze large amounts of data. Organizations are now
collecting not only internal financial and operational data, but are also
collecting large amounts of historical data on their customers, suppliers and
other external sources. At the same time, to more quickly react to changing
business conditions, many organizations have been flattening their
organizational structures and empowering employees at all levels to make
decisions. The desire to distribute decision making throughout all levels of an
organization has created a need by more people to access the vast amounts of
business data collected each day. In addition to data access, organizations also
face the challenges of performing complex computational analysis on the
collected data, and disseminating information broadly to thousands of employees,
customers, suppliers and others. Collectively, these functions have come to be
known as Business Intelligence, and refer to the organization and analysis of
information ranging from accounting and inventory management data to customer
demographic information.

To meet these challenges, organizations typically maintain a variety of
databases and technology solutions, each addressing a portion of their overall
requirements. Popular Business Intelligence applications utilize data warehouses
and data marts, query and on-line analytical processing (OLAP) tools, reporting
systems, Customer Relationship Management (CRM) applications and Enterprise
Resource Planning (ERP) applications. META Group, an independent industry
analyst, cites estimates showing that the market for data warehouse products and
services is expected to grow from $4.5 billion in 1996 to $15 billion by the
year 2000.

In one segment of the Business Intelligence market, query tools
(sometimes referred to as "reporting and analysis" products) are designed to
provide end users with a means to directly retrieve specified data from various
data sources including transaction systems, operational systems, data warehouses
and data marts. Multi-media reporting products provide a content-rich working
environment preferred by the vast majority of users (compared to the
spreadsheet-oriented environment preferred by analysts). Multi-media reports
graphically bring together information from multiple sources, converting complex
information into more easily understood documents.

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Another segment of the Business Intelligence market is found in the
data warehouse and OLAP markets. Data warehouses and data marts are repositories
of summarized historical data often extracted from enterprise databases. OLAP
solutions provide a means to analyze and explore data using an intuitive set of
business rules and dimensions. An example would be an analysis that tracks
profitability by product, channel, geography, customer or fiscal period. In
addition, OLAP search engines allow business users within an organization to
perform their own analyses, rather than rely on a company's MIS department to
generate such reports. Typically, OLAP solutions also provide complex
computational capabilities, including sophisticated time-series analysis, as
well as ad hoc, drill-down and interactive analysis (for example, a marketing
manager identifying a market share reduction can drill down to isolate the
problem to a specific product at a specific store).

Today, three architectures dominate the OLAP marketplace. Desktop OLAP
(DOLAP) is designed for personal analysis and mobile users, and provides a
quick, low-cost solution for applications that involve small data sets that do
not require frequent updates. Multidimensional OLAP (MOLAP) products use a
specialized, non-relational, highly-indexed database technology well-suited for
workgroups and departments requiring fast access to medium-sized data sets
(e.g., tens of gigabytes of data). Relational OLAP (ROLAP) products leverage
powerful relational database management systems to provide access to larger
amounts of detailed data (up to several terabytes) for what can amount to
thousands of users with complex analytic requirements (such as customer
relationship management or category management). All three architectures are
popular in the marketplace, and in fact, many organizations employ more than one
OLAP product in an effort to address the requirements of several analytic
applications.

A key trend in this environment is the search by organizations to
extend the benefits of installed databases to empower employees, suppliers,
partners and customers at all levels to make better business decisions and react
faster to market opportunities. Organizations are increasingly seeking simpler,
more cost effective, more complete and more thoroughly integrated Business
Intelligence solutions. Moreover, organizations require Business Intelligence
solutions to offer cost-effective deployment and maintenance capabilities and
compliance with industry standards to preserve the ability to integrate hardware
and software from a variety of vendors.

This trend has also led organizations to create Web-based
infrastructures through which they can disseminate information to both internal
and external user groups. Intranets now provide organizations with a
cost-effective means of securely distributing information to employees,
customers, suppliers, partners and others. Internet portals (such as Yahoo! and
Excite) are providing an easy way to navigate the vast amount of information
available on the Internet. Meanwhile, corporate users are beginning to rely on
Business Intelligence portals to navigate the wide variety of decision-making
information on the organization's intranet and the Internet. Business
Intelligence solutions must provide users with easy portal access to all
information, comprehensive abilities to access, analyze, report and proactively
deliver information, standards-based security and scalability.

THE INFORMATION ADVANTAGE SOLUTION

Information Advantage develops, markets and supports enterprise
scalable Business Intelligence software. The Company's comprehensive solution,
MyEureka!, combines the industry's first portal to Business Intelligence with a
powerful set of components for transforming raw data into meaningful
information. Through the use of an advanced architecture, the Company designed
MyEureka! to let organizations start with a small application and grow to
accommodate thousands of active users analyzing terabytes of data. By enabling
organizations to push effective decision making to all levels of the
organization, MyEureka! helps organizations create an "intelligent enterprise"
capable of quickly identifying and reacting to market opportunities. Key
attributes of the MyEureka! solution include:

EASY ACCESS TO ALL CORPORATE INFORMATION. MyEureka! is a Business
Intelligence portal which gives employees at all skill levels access to
corporate information from a single point of entry. Similar to the way that
certain Internet portals give Internet users a simple way to access and organize
the vast resources of the Internet, MyEureka! gives corporate users a means to
search, access and organize Business Intelligence information for
decision-making. With MyEureka!, users can find and access a broad variety of
Business Intelligence resources, including queries, reports, OLAP analyses,
spreadsheets, and multimedia presentations, either on the organization's

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intranet or anywhere on the Internet. The user can then transparently launch the
appropriate application to immediately create a powerful decision-making tool.
Customers can organize their companies' resources into "channels" to make them
easily available to colleagues interested in the same content, or they can
broadcast Business Intelligence resources when the situation calls for immediate
attention. Personal news pages and user profiles let users tailor their views of
the MyEureka! portal to their specific information needs and visual preferences.
All of this is protected by sophisticated, industry-standard security mechanisms
that enable companies to control access to specific individuals, workgroups or
the entire enterprise.

COMPREHENSIVE BUSINESS INTELLIGENCE SUITE. The Company offers a
comprehensive and configurable suite of Business Intelligence components. These
components provide for a wide variety of Business Intelligence capabilities
including basic query and reporting, enterprise reporting, desktop OLAP (DOLAP),
multidimensional OLAP (MOLAP) and relational OLAP (ROLAP). In addition,
user-interface components let users control their Business Intelligence
environments to match their requirements. As a result, MyEureka! can be deployed
in a wide variety of solutions including information portals, enterprise
reporting and analysis, data warehousing, Customer Relationship Management
applications and Enterprise Resource Planning applications.

SCALABLE ARCHITECTURE. A scalable architecture is vital to keeping the
production of Business Intelligence flowing with optimal performance throughout
the organization. MyEureka!'s scalable architecture features numerous services
that are integral to supporting systems that will grow to hundreds or thousands
of users over time.

Workgroup security assures that the right information is available to
the right users regardless of their physical location. MyEureka! provides
individual, workgroup, and public security levels for managing the flow of
information throughout the system. Encryption protects user-IDs, passwords, and
content sent across the network.

User profiles allow administrators to regulate interaction with
MyEureka! by balancing user needs with available resources and support expenses.
Profiles also determine available functionality for each user, allowing users to
graduate to new capabilities as required over time. Administrators can capture
and monitor repository and database usage statistics to monitor services, spot
problems, tune performance and plan resources.

MyEureka! was designed with an open architecture to integrate with most
popular tools, databases, and platforms provided by other vendors. MyEureka!
runs on the following server operating systems: Microsoft NT, HP-UX, Sun
Solaris, IBM AIX, NCR SVR4, SGI IRIX, Sequent DYNIX/ptx and Unisys SVR4. It
accesses the following relational database platforms: MS SQL Server, Oracle, Red
Brick Warehouse, HP-Intelligent Warehouse, IBM DB2 6000, IBM DB2 Universal
Database, Informix, NCR Teradata DBS, Sybase, Sybase IQ and Tandem Non-Stop SQL.
As a result, organizations implementing MyEureka! can leverage their
often-significant investment in existing operating systems and database
technologies.

CUSTOMER SERVICES. To complement its advanced product offerings, the
Company has developed a highly trained customer support staff with technical
competencies in a variety of areas, including Windows NT and UNIX operating
systems, database management, distributed computing and multidimensional
analysis. The Company believes that to enable its customers to effectively
develop and deploy Business Intelligence applications, it must provide training
and consulting services in these and other areas. Accordingly, the Company has
established an extensive customer services group consisting of business
consulting and implementation consulting, including: business assessment,
solution assessment, technical support, education, implementation, prototyping
workshops and other advanced services.

PRODUCTS AND TECHNOLOGY

The Company's MyEureka! solution is composed of seven key Business
Intelligence technologies. This architecture gives customers the ability to
tailor a solution that fits their immediate requirements while allowing room for
the application to grow in terms of functionality, number of users, and the
nature and volume of data:

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- - User Interface - Provides users with easy access to any existing Business
Intelligence resource and consolidates them into a single screen for fast,
seamless information delivery. Users only have access at pre-determined
security levels that can be applied to content from intranets, extranets
and the Internet.

- - Query Engine - Answers questions that require a view of the organization at
a certain point in time. For example, who filed claims last week. The Query
Engine provides direct access to transaction databases, operational
databases, data warehouses and data marts.

- - Multi-Dimensional OLAP Engine (MOLAP) - Allows data from relational
databases to be moved into a specialized data structure that allows shared,
high-speed analysis of financial and product information.

- - Desktop OLAP Engine (DOLAP) - For Users that require high-speed analysis
when disconnected from the network. DOLAP data cubes can be moved
automatically or on demand from the content server to a personal computer.

- - Relational OLAP Engine (ROLAP) - For highly granular analyses of customers,
transactions, and large amounts of product data. The ROLAP Engine is a
critical component of Customer Relationship Management applications.

- - Report Engine - Produces content rich multi-media web report documents that
may include graphic information from many sources. The Report Engine's
object technology enables integration of structured and unstructured
content, and complex elements.

- - Content Server - Manages and stores report documents, report objects,
briefing books, agents, channels, events, and user profiles. The Content
Server creates and presents a personal portal view of information to users.

THE MYEUREKA! PRODUCT ARCHITECTURE

[DIAGRAM OF PRODUCT ARCHITECTURE]

STRATEGY

The Company's strategy is to establish itself as the leading provider
of Business Intelligence software solutions. Key elements of the Company's
strategy include:

FOCUS ON BUSINESS INTELLIGENCE SOLUTIONS

By combining elements from its comprehensive suite of Business
Intelligence components, the Company's customers can create any of several
MyEureka! solutions that match the unique needs of various applications.

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INFORMATION PORTAL. The Information Portal provides users with easy
access to any existing Business Intelligence resource and consolidates them into
a single screen for fast, seamless information delivery. Users only have access
at pre-determined security levels that can be applied to content from intranets,
extranets and the Internet.

ENTERPRISE REPORTING AND ANALYSIS. MyEureka! for Enterprise Reporting
and Analysis gives users the ability to build sophisticated reports based on
information contained in relational databases (either on-line transaction
processing databases, data marts or data warehouses). In addition, MyEureka!
MOLAP and DOLAP capabilities allow users to analyze data subsets and download
them to their desktop or laptop systems - even from remote locations.

DATA WAREHOUSING. MyEureka! for Data Warehousing allows organizations
to analyze large data sets across high user populations. The solution delivers
robust relational analysis capabilities through the easy access of the
Information Portal discussed above. Organizations can benefit from powerful
customer profiling, product analysis or any member service application that
analyzes several gigabytes or terabytes of data.

ENTERPRISE RESOURCE PLANNING. MyEureka! for ERP simplifies data access
for reporting and analysis from complex, dynamic transactional systems -- even
across multiple ERP and legacy applications. Customers can link the solution
with an ERP vendor's own data warehouse, or they can access information directly
from the file system for applications where both flexibility and fast report
generation are critical. The Company leverages partnerships with several leading
ERP vendors including SAP and PeopleSoft.

CUSTOMER RELATIONSHIP MANAGEMENT. MyEureka! for CRM combines our
Information Portal solution with MyEureka! relational analysis to help
organizations strengthen customer relationships by better understanding their
wants and needs. The solution can track purchases, calls to and from call
centers, Web site visits, direct mail campaigns, demographic information,
purchasing habits and more. Armed with this information, organizations can
increase customer loyalty by sending targeted messages to the right prospects.

EXPAND GLOBAL DISTRIBUTION

The Company sells its products primarily through direct sales. The
Company also uses strategic partners to sell its products in targeted markets.
The Company has direct sales offices in 12 states, Canada, the United Kingdom,
Germany, France, Holland and Australia, and has established strategic
relationships in Finland, Norway, South Africa, Sweden, Korea and Japan. The
Company is presently localizing MyEureka! for the Japanese, French and German
markets. The Company intends to expand its direct sales and pre-sales support
organizations and to develop additional strategic relationships both in its
existing markets and in other locations worldwide. To facilitate its
international expansion, the Company anticipates localizing MyEureka! for
additional foreign markets in the future.

EXPAND STRATEGIC RELATIONSHIPS AND OTHER MARKETING CHANNELS

The Company's strategy is to supplement its direct sales organization
with strategic relationships, including solution development partners, sales
affiliates and marketing partners. The Company's solution development partners,
such as Acxiom, DynaMark, IBM and PeopleSoft are developing industry specific
software applications in which MyEureka! is embedded. The Company sells its
products directly to solution development partners who integrate and sell
solutions to customers; the above partnerships are the direct result of a
focused effort on the Company's part to develop OEM relationships with software
vendors offering technology that can leverage the Company's suite of products.
The Company also has relationships with sales affiliates, such as Cambridge
Technology Group, EDS, Ernst & Young and KPMG, who help identify and qualify
sales prospects, work closely with the Company during the sales and
implementation cycles and provide after-market support. In addition, the Company
has strategic relationships with marketing partners, such as Hewlett-Packard,
Sun Microsystems, and SPSS, who provide complementary marketing programs
designed to promote product awareness for MyEureka!. These relationships provide
additional sales and marketing channels, thereby enhancing the Company's
position as the leading provider of enterprise scalable Business Intelligence
software solutions. The Company's objective is to

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increase license revenues from strategic relationships as a percentage of total
license revenues, by enhancing its current strategic relationships and adding
additional strategic partners.

FOCUS ON SUCCESSFUL CUSTOMER IMPLEMENTATIONS

The Company's strategy is to deliver technology and services that
enable its customers to quickly and cost effectively implement and maintain
applications for the intelligent enterprise. The Company's success is dependent
upon its customers' successful implementations of its products. The Company
believes that its comprehensive consulting, implementation, support and training
services enable customers to successfully implement MyEureka! and contribute to
customer satisfaction, strong customer references and long-term relationships.
The Company offers worldwide training, consulting and support services for its
customers directly through its customer services group and indirectly through
its solution development partners and sales affiliates. In addition to its
advanced training and consulting services, the Company provides its customers
with an extensive array of ongoing support services, including software updates,
documentation updates, telephone support and product maintenance. A significant
portion of the Company's revenues each period is derived from upgrades and
services provided to its installed customer base. The Company intends to
maintain its focus on customer success and to continue to invest in support
services designed to promote such success.

CUSTOMERS AND APPLICATIONS

The following list of customers is representative of the businesses and
industries in which the Company's products have been installed in the past:

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RETAIL INSURANCE
Ahold USA, Inc. Cigna-Intracorp, Inc.
Dayton Hudson Corporation CNA Insurance Company
DFS Group, Ltd Regence Blue Shield
Dial Corporation Liberty Health (CANADA)
Fingerhut Corporation Northland Insurance Company
Gap Inc. The Northwestern Mutual Life
Longs Drug Stores California, Inc Insurance Company
National Grocers Co., Limited (CANADA) The Prudential Insurance
Neiman-Marcus Company of America
Proffitt's Inc.
J. Sainsbury PLC (U.K.) TECHNOLOGY/TELECOMMUNICATIONS
Sears Canada, Inc. (Canada) 360(0)Communications Company
Sears Roebuck, & Co. Aerial Communications, Inc.
Shopper's Drug Mart (CANADA) BCTel (CANADA)
The Southland Corp. CCC Information Services, Inc.
The Stop & Shop Supermarket Company Pacific Bell Communications
Superdrug Stores, PLC (U.K.) Pacific Bell Video Services
SuperValu PrimeStar Partners, LP
Tandy Corporation
Dayton Hudson Corporation, Target GOVERNMENT
Stores Division Inland Revenue (U.K.)
Tyson Foods, Inc. State of California
The Warehouse Ltd. (New Zealand) State of Washington Department of
Wearguard Corporation Social and Health Services
Utah Courts
United States Customs Service
United States Department of Defense
University of California, Berkeley
</TABLE>

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<TABLE>

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PACKAGED GOODS MANUFACTURING
Birds Eye Walls, Inc. (U.K.) Amgen, Inc.
Brunswick Corporation The Goodyear Tire and Rubber Company
ConAgra Frozen Foods Mattel, Inc.
Dominick's Finer Foods Minnesota Mining and Manufacturing Company
Land O'Lakes, Inc. Rockwell International Corporation
Nabisco, Inc. Snap-On Incorporated
The Quaker Oats Company

FINANCIAL SERVICES OTHER
Banc One Services Corporation Acxiom Corporation
DynaMark, Inc. The Automobile Association (U.K.)
Honor Technologies, Inc. Cargill, Inc.
MasterCard International Incorporated Dana Computer Corporation
T. Rowe Price Investment Technologies Inc. Electronic Data Systems Corporation
Federal Express Corporation
MidAmerican Energy Company
HEALTH CARE Miller Brewing Company
Fairview Health Systems Northwest Airlines Corporation
MCC Behavioral Care NTT Data (Japan)
Owens Healthcare, Inc. Agora Food Merchants
Vencor Perseco
United HealthCare Corporation The Reader's Digest Association, Inc.
Regie Media Belge S.A. (Netherlands)
VIPS (a division of First Data Corp.)
</TABLE>

Below are several examples of uses of the Company's products and
technology.

LEADING CAR RENTAL COMPANY. With car rental locations in suburban and
on-airport locations throughout the U.S., a major car rental company uses the
MyEureka! Information Portal to improve customer service and overall
profitability. The solution helps the company better monitor customer rental
habits and vehicle utilization by offering a single, easy-to-use point of entry
to Business Intelligence information on its corporate intranet.

LARGE GOVERNMENT ENTITY. A large United States government entity uses
MyEureka! for Enterprise Reporting and Analysis to reduce costs and make
efficient use of its physical resources. The MyEureka! solution currently
enables 3,500 employees to track and analyze the use and asset value of all of
its properties.

GLOBAL MANUFACTURING COMPANY. Selling more than 50,000 products in 200
countries, this manufacturer uses MyEureka! for Data Warehousing to help fulfill
its strategic goal of presenting a single interface to its customers. Targeted
for 30,000 users worldwide, MyEureka! analyzes and delivers standardized and
digitized data from the company's entire enterprise within a terabyte-sized data
warehouse, helping employees in all of its business units to quickly and
effectively respond to customer inquiries.

LEADING RETAILER. One of the world's largest retailers, this
organization depends on MyEureka! for Data Warehousing to strengthen business
analysis and simplify decision-making throughout its enterprise. With MyEureka!,
human resources staff can quickly analyze associate sales performance, home
service professionals can evaluate product reliability and credit offices can
accurately assess account performance.

GLOBAL LOGISTICS AND DELIVERY ORGANIZATION. Handling an average of 3.1
million packages daily, this leading logistics company uses MyEureka! for Data
Warehousing to deliver an enterprise-wide application. More than 10,000 of its
employees -- including air and ground operations, customer service, sales and
management -- use the application to easily access the information they need to
provide superior customer service. Customers can even track the status of their
mailings themselves on the Internet.

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SALES AND MARKETING

SALES

The Company sells its products in North America, Europe and Australia
primarily through its direct sales and services organizations. The Company
employs highly skilled engineers and technically proficient sales
representatives capable of serving the sophisticated needs of its customers'
information and business management staffs. The Company has domestic sales or
support staff located in California, Colorado, Georgia, Illinois, Massachusetts,
Michigan, Minnesota, New Jersey, New York, Ohio, Texas and Virginia. The Company
has international sales and support offices in Toronto, Canada; London, England;
Cologne, Germany; Paris, France; Amsterdam, Holland; and Sydney, Australia. See
Note 14 to the Consolidated Financial Statements.

To date, a majority of the Company's sales have been generated from its
direct sales force. The Company intends to supplement its sales efforts by
implementing and supporting its products through a network of solution
development partners, sales affiliates and marketing partners. The Company's
strategic partners are independent organizations that perform some or all of the
following functions: sales and marketing; systems implementation and
integration; software development and customization; and ongoing consulting,
training, service and technical support.

The Company has an ongoing program to recruit major systems integrators
and to train and support them in identifying sales opportunities and
implementing the Company's products. The Company is working with several of
these affiliates to develop additional applications for targeted markets, such
as finance and banking, insurance, telecommunications and retail. The Company
offers such sales affiliates discounts on products and training, a cooperative
marketing program, and field level assistance from the Company's direct sales
force. The Company currently has such relationships with Cambridge Technology
Group, EDS, Ernst & Young, KPMG, and Andersen Consulting.

The Company believes that its strategic partners have significant
influence over product choices by customers and that its relationships with
these partners are an essential element in its marketing, sales and
implementation efforts. Through its partner network, the Company is able to
obtain leads and provide customers with trained and knowledgeable software
professionals who are available locally to implement its systems as well as
provide ongoing service and support. Some of the Company's strategic partners
customize the Company's solutions to fit individual business needs and develop
industry-specific software applications that integrate with and extend the
functionality of the Company's products. The Company currently has solution
development partnerships with DynaMark, IBM, Acxiom, JBA and PeopleSoft.

MARKETING

The Company is focused on building market awareness and acceptance of
the Company and its products as well as on developing strategic partnerships.
The Company has a comprehensive marketing strategy with several key components:
image and awareness building, direct marketing to both prospective and existing
customers, a strong Web presence, broad-scale events with strategic partners and
local marketing with partners. The Company's corporate image strategy includes
trade shows, as well as analyst and press tours. The Company's direct marketing
includes ongoing direct mail efforts to existing and prospective customers. For
prospective customers, the Company also offers seminars to assist them in
selecting enterprise scalable Business Intelligence solutions. Seminars are
offered in conjunction with strategic partners in their local or
industry-specific markets. The Company's Web-based marketing is designed to
generate new leads for the Company. In December, the Company introduced the
first of an on-going program of "Cyber-seminars." Since then, 1,500 individuals
have participated. The Company increases product awareness by sponsoring
large-scale events and seminars for prospective customers with key industry
partners. Finally, the Company's marketing strategy is designed to take
advantage of the Company's partnership network by including cooperative
marketing programs designed for partners' local markets. The Company's marketing
partners include Hewlett Packard, Sun Microsystems, and SPSS.

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As of January 31, 1999, the Company's sales and marketing organization
consisted of 195 employees compared to 150 and 155 employees at January 31, 1998
and 1997, respectively.

CUSTOMER SERVICES

The Company believes that providing superior service is critical for
customer success. The Company's strategy is to deliver technology and services
that enable its customers to implement Business Intelligence solutions quickly.
Its focused experience in designing and implementing applications is a
significant factor in enabling the Company to implement this strategy. The
Company intends to continue to invest in specialized training of its personnel
to provide superior customer service. Most of the Company's customers currently
pay for maintenance agreements that entitle them to technical support and
periodic upgrades. The Company also offers additional training and consulting
services on a fee basis.

TECHNICAL SUPPORT

The Company has established corporate maintenance and technical call
centers in Atlanta, Minneapolis, the United Kingdom and Holland. The Company
provides customers with a comprehensive array of services, including software
updates, documentation updates, telephone support, and product maintenance. The
annual fee for such services is typically 18% of the list price of the software
products licensed and supported.

PROFESSIONAL SERVICES

The Company offers a series of business and technical courses to meet
the education and training requirements of all levels of professionals
associated with Business Intelligence. These courses are designed to provide the
knowledge, skills and confidence to implement enterprise-wide Business
Intelligence solutions and enhance the use of MyEureka!. The Company offers
several modular courses that can be tailored to specific customer needs.
Education specialists meet with customers to design an education plan to meet
organizational goals. Regularly scheduled courses are offered at the Company's
training facilities located in Minneapolis, Atlanta, London and Cologne,
Germany. End user customer courses are provided at customers' facilities. In
addition, the Company offers the "Online University," an Internet-based learning
solution that offers customers the ability to access tutorials via the World
Wide Web.

The Company offers a wide range of consulting services to support the
implementation requirements of the MyEureka! line of products and promote
customer self-sufficiency. The Company utilizes a proprietary methodology for
implementation support, called DecisionPath. DecisionPath was developed
internally and incorporates the Company's extensive implementation experience.
Because of the varying needs of its customers, the Company offers modular
services in the following areas: business intelligence application design; data
warehouse architecture design; MyEureka! implementation; end-user content and
delivery; and MyEureka! optimization.

The Company offers a series of prototyping workshops in its
DecisionCenter facility in Eden Prairie, a suburb of Minneapolis. The
DecisionCenter is a fully equipped prototyping environment, staffed with
knowledgeable business and technical personnel. Each workshop utilizes the
customer's own data, making the prototyping experience as realistic as possible.
The Company believes that a successful implementation of new technology can be
traced to a successful prototype. These prototype systems use actual company
data to assist the business users in identifying the questions they need to ask
but have been unable to visualize. The time and effort for a company to set up
an evaluation environment can be expensive and fraught with technical
infrastructure complexities. The DecisionCenter provides the Company's customers
with the training benefits of prototyping but shields them from such
complexities.

ADVANCED SERVICES

The Company's advanced services personnel are specialists in designing
and developing Business Intelligence applications. They have extensive knowledge
of the MyEureka! development environment, and use this

9
<PAGE>

expertise to assist customers in building custom applications. The development
services provided by the advanced services group fall into three categories:

- - custom Business Intelligence applications such as pricing analysis,
activity-based costing, and customer relationship management,

- - product extensions, which are sold as optional product software, and
provide extended capabilities for the end user or administrator, and

- - software outsourcing, which provides development enhancement and
maintenance for specific software products.

As of January 31, 1999, the Company's services organization consisted
of 115 employees compared to 114 and 85 employees at January 31, 1998 and 1997,
respectively.

RESEARCH AND DEVELOPMENT

Research and development has provided the foundation for the Company's
position in the marketplace, and the Company intends to continue to make
substantial investments in research and development and related activities to
maintain and enhance its product lines. The Company believes that its future
success will, in large part, depend on its ability to maintain and improve
current products, and to develop new products that meet emerging decision
support needs. Research is focused in three areas: identifying market needs,
designing applications for these needs and implementing such solutions in a
reliable and easy-to-use fashion. Current development activities are focused on
product enhancements in several key areas: OLAP engine, Windows NT client
delivery systems, Internet delivery systems, agent technology and forecasting.
In addition to its design and implementation functions, the development group
infrastructure provides a full suite of documentation, quality assurance,
delivery and support capabilities for the Company's products.

As of January 31, 1999, the Company's research and development
organization consisted of 109 employees compared to 88 and 77 employees at
January 31, 1998 and 1997, respectively. For the five-year period ending January
31, 1999 the Company has spent $31,735 on research and development. Most of the
senior members of the Company's research and development organization have been
employed by the Company since its inception.

COMPETITION

The Company operates in a market which is intensely competitive, highly
fragmented and characterized by rapidly changing technology and evolving
standards.

The Company's current and prospective competitors offer a variety of
planning and analysis software solutions and generally fall within four
categories:

- - vendors of desktop OLAP software such as Cognos and Business Objects;

- - vendors of multidimensional OLAP software such as Oracle (Express), Arbor
Software, Seagate (Holos) and SAS;

- - vendors of OLAP/relational database software such as MicroStrategy and
Platinum Technology (Prodea); and

- - vendors of enterprise reporting software, such as Actuate, Business
Objects, Cognos, and Seagate (Crystal Reports).

See also "Management's Discussion and Analysis of Financial Condition
and Results of Operations-Cautionary Statement."

LIMITED PROTECTION OF PROPRIETARY TECHNOLOGY; RISKS OF INFRINGEMENT; USE OF
LICENSED TECHNOLOGY

10
<PAGE>

its software pursuant to signed license agreements, which impose certain
restrictions on licensees' ability to utilize the software. In addition, the
Company seeks to avoid disclosure of its trade secrets, including requiring
those persons with access to the Company's proprietary information to execute
confidentiality agreements with the Company and restricting access to the
Company's source code. The Company seeks to protect its software, documentation
and other written materials under trade secret and copyright laws, which afford
only limited protection.

Despite the Company's efforts to protect its proprietary rights,
unauthorized parties may attempt to copy aspects of the Company's products or to
obtain and use information that the Company regards as proprietary. Policing
unauthorized use of the Company's products is difficult, and while the Company
is unable to determine the extent to which piracy of its software products
exists, software piracy can be expected to be a persistent problem. In addition,
the laws of many countries do not protect the Company's proprietary rights to as
great an extent as do the laws of the United States.

To date, the Company has not been notified that the Company's products
infringe the proprietary rights of third parties.

See also "Management's Discussion and Analysis of Financial Condition
and Results of Operations-Cautionary Statement."

EMPLOYEES

As of January 31, 1999, the Company had a total of 457 employees, of
which 378 were based in the United States, 57 were based in the United Kingdom,
6 were based in Canada, 11 were based in other European countries, and 5 were
based in Australia. Of the total, 195 were engaged in sales and marketing, 109
were in research and development, 115 were in services, and 38 were in finance,
administration and operations. The Company's future performance depends in
significant part upon the continued service of its key technical, sales and
senior management personnel, six of whom have signed employment agreements. None
of the Company's employees is represented by a labor union. The Company has not
experienced any work stoppages and considers its relations with its employees to
be good.

ITEM 2 PROPERTIES

The Company's principal administrative, sales, marketing, support, and
research and development facility is located in approximately 36,500 square feet
of space in Eden Prairie, Minnesota. The lease on this office space expires on
June 30, 2002. In connection with the merger with IQ Software Corporation
("IQ"), the Company assumed a lease on a 28,000 square foot facility in
Norcross, Georgia. The lease on this facility expires on February 28, 2002. In
March 1999, the Company signed a five-year lease on a 42,300 square-foot office
facility in Bloomington, Minnesota. The Company also leases other domestic sales
offices throughout the United States, as well as international offices in
Canada, the United Kingdom, Australia, France, Holland and Germany. The Company
believes that suitable additional or alternative space will be available in the
future on commercially reasonable terms as needed.

ITEM 3 LEGAL PROCEEDINGS

On October 23, 1997, a complaint was served on IQ and certain of its
executive officers on behalf of purchasers of IQ Common Stock between May 8,
1996 and February 3, 1997 alleging violations of Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934. The claim alleges that IQ failed to disclose
the risks and liabilities assumed by IQ in connection with the transition of its
sales force from an inside telesales model to an outside field-based model. The
Company believes that the claim is without merit and is vigorously defending the
action. The parties to the action have reached a tentative agreement to settle
the action. The agreement is subject to court approval by the U.S. District
Court of the Northern District of Georgia, Atlanta Division, before it becomes
final. In the event the Company is unsuccessful in finalizing the agreement and
ultimately defending against the claim, the Company's business, operating
results and financial condition could be materially and adversely affected.

11
<PAGE>

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of security holders through the
solicitation of proxies or otherwise during the fourth quarter of the Company's
most recently completed fiscal year.

PART II

ITEM 5 MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Common Stock of the Company has been included in the Nasdaq
National Market under the symbol "IACO" since the completion of its initial
public offering on December 17, 1997. The following table sets forth the
approximate high and low closing prices for the Common Stock for the periods
indicated as reported by the Nasdaq National Market. Such quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions.

Period High Low
------ ---- ---
<S> <C> <C>
Fiscal 1998
Fourth Quarter......................................... $ 6-1/2 $ 5-7/16
Fiscal 1999
First Quarter.......................................... $ 9-5/8 $ 6
Second Quarter......................................... 10-1/8 5-7/8
Third Quarter.......................................... 6-5/8 3
Fourth Quarter......................................... 12-11/16 5-5/16
Fiscal 2000
First Quarter through March 31, 1999................... $ 13-9/16 $ 6-5/8
</TABLE>

As of April 7, 1999, the Company had 238 shareholders of record,
including 14 holders of Preferred Stock and 10 holders of IQ Common Stock who
had yet to present their share certificates for reissuance into Common Stock,
and approximately 4,800 beneficial owners.

The Company has never paid or declared any cash dividends on its Common
Stock and does not intend to declare or pay dividends on its Common Stock in the
foreseeable future. The Company presently expects to retain its earnings to
finance the development and expansion of its business. The declaration or
payment by the Company of dividends, if any, on its Common Stock in the future
is subject to the discretion of the Board of Directors and will depend on the
Company's earnings, financial condition, capital requirements and other relevant
factors.

USE OF PROCEEDS FROM INITIAL PUBLIC OFFERING

The Company's Registration Statement on Form S-1 (File No. 333-37707)
was declared effective by the SEC on December 16, 1997, and the initial public
offering commenced on December 17, 1997. From the effective date of the
Registration Statement on Form S-1 through January 31, 1999, the Company had
used approximately $3,486 of the net proceeds of $19,768 for the repayment of
indebtedness.

ITEM 6 SELECTED FINANCIAL DATA

The following selected consolidated financial data should be read in
conjunction with the Consolidated Financial Statements and Notes thereto and
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations," which are included elsewhere in this Annual Report. The
consolidated balance sheet data at January 31, 1995 are derived in part from
unaudited consolidated financial statements not included herein. In the opinion
of

12
<PAGE>

the Company, such data include all adjustments, consisting solely of normal
recurring accruals, which are necessary to present fairly the data as of such
date. The consolidated statement of operations data for the fiscal years ended
January 31, 1999, 1998, 1997, 1996 and 1995 and the consolidated balance sheet
data at January 31, 1999, 1998, 1997 and 1996 are derived from the Company's
audited Consolidated Financial Statements contained herein or previously filed
by IA and IQ. The following financial data reflect the merger with IQ, which was
accounted for as a pooling transaction, and are presented as though the two
companies had been combined as of the earliest period shown.

Fiscal Year Ended
January 31
--------------------------------------------------------

1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>

CONSOLIDATED STATEMENT OF OPERATIONS DATA:

Revenues:
License $ 42,283 $ 28,970 $ 23,676 $ 18,268 $ 17,140
Service 28,407 21,325 12,749 9,229 6,774
-------- -------- -------- -------- --------
Total revenues 70,690 50,295 36,425 27,497 23,914
-------- -------- -------- -------- --------

Cost of revenues:
License 1,601 1,564 1,446 1,055 691
Service 12,854 11,113 6,724 4,835 3,687
-------- -------- -------- -------- --------
Total cost of revenues 14,455 12,677 8,170 5,890 4,378
-------- -------- -------- -------- --------
Gross margin 56,235 37,618 28,255 21,607 19,536
-------- -------- -------- -------- --------

Operating expenses:
Sales and marketing 34,636 28,497 23,198 14,564 11,281
Research and development 9,065 7,582 5,333 4,883 4,872
General and administrative 6,500 6,083 5,764 4,716 4,192
Non-recurring charges 6,502 -- -- 4,868 1,002
-------- -------- -------- -------- --------
Total operating expenses 56,703 42,162 34,295 29,031 21,347
-------- -------- -------- -------- --------

Loss from operations (468) (4,544) (6,040) (7,424) (1,811)
Other income, net 1,491 506 398 601 268
-------- -------- -------- -------- --------

Income (loss) before provision for
(benefit from) income taxes 1,023 (4,038) (5,642) (6,823) (1,543)

Provision for (benefit from)
income taxes (5,644) 506 669 (139) 1,115
-------- -------- -------- -------- --------

Net income (loss) $ 6,667 $ (4,544) $ (6,311) $ (6,684) $ (2,658)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------

Income (loss) per share
Basic $ 0.27 $ (0.38) $ (0.63) $ (0.71) $ (0.29)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Diluted $ 0.25 $ (0.38) $ (0.63) $ (0.71) $ (0.29)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Shares used in computing income (loss) per share:
Basic 24,776 12,030 10,011 9,414 9,093
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Diluted 26,880 12,030 10,011 9,414 9,093
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------

CONSOLIDATED BALANCE SHEET DATA:

Working capital $ 44,708 $ 37,256 $ 15,177 $ 14,752 $ 13,196
Total assets 71,207 59,246 31,213 26,445 23,916
Total liabilities 19,350 15,177 11,290 6,895 6,993
Convertible redeemable
preferred stock -- -- 17,410 12,487 5,337
Stockholders' equity 51,857 44,069 2,513 7,063 11,586

</TABLE>

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<PAGE>

ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

THE FOLLOWING DESCRIPTION OF THE COMPANY'S FINANCIAL CONDITION AND
RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE INFORMATION
INCLUDED ELSEWHERE IN THIS ANNUAL REPORT. THIS DESCRIPTION CONTAINS CERTAIN
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS COULD DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN OF THE RISK FACTORS SET FORTH
BELOW AND ELSEWHERE IN THIS ANNUAL REPORT.

OVERVIEW

In September 1998, the Company completed a merger with IQ Software
Corporation (IQ), a software development company which develops and markets a
suite of business intelligence products and related services. The transaction
was accounted for as a pooling, and all financial information has been presented
as if the two companies had been combined as of the earliest period discussed.
References to "the Company" within this discussion are intended to mean the
combined company composed of the businesses of IA and IQ.

The Company's license revenues are derived from (a) one-time perpetual
licenses for the right to use its software products, and (b) licenses to
resellers which authorize the sale of the Company's software as a component of
the resellers' software. License fees from resellers are generally determined on
the basis of the number of servers, the number of users and the size of
databases in the application. The Company's service revenues, which have
accounted for approximately 40 percent of the Company's total revenues for the
past three years, include fees for maintenance, training and consulting
services. The Company anticipates that service revenues will continue to account
for a significant portion of the Company's total revenues.

The Company licenses its software through its direct sales force and
through indirect channels, including solution development partners, sales
affiliates and marketing partners. Revenues from indirect channels were
approximately 13.3%, 17.4% and 24.4% of the Company's license revenues for
fiscal 1999, 1998 and 1997, respectively. The Company intends to expand its
strategic relationships, thereby increasing the revenues generated from indirect
channels as a percentage of total license revenues. The Company intends to
expand its international operations and has committed, and continues to commit,
significant management time and financial resources to developing direct and
indirect international sales and support channels. The Company has international
sales and support offices in Toronto, Canada; London, England; Cologne, Germany;
Paris, France; Amsterdam, Holland; and Sydney, Australia. To date, most of the
Company's international revenues have been derived from the United Kingdom,
Germany and Canada. There can be no assurance that the Company will be
successful in expanding its indirect channels or international operations.

The American Institute of Certified Public Accountants' has approved a
new Statement of Position (SOP), SOP 97-2, "Software Revenue Recognition"
effective for transactions entered into in fiscal years beginning after December
15, 1997. The Company has adopted this new statement and management has
concluded that its adoption has not had a material effect on the timing of the
Company's revenue recognition or caused changes to its revenue recognition
policies.

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<PAGE>

RESULTS OF OPERATIONS

The following table sets forth certain statement of operations data as
a percentage of total revenues for the fiscal years ended January 31:

1999 1998 1997
----- ----- -----
<S> <C> <C> <C>

Revenues:
License ............................... 59.8 % 57.6% 65.0%
Service ............................... 40.2 42.4 35.0
----- ----- -----
Total revenues .......................... 100.0 100.0 100.0

Cost of Revenues:
License .............................. 2.3 3.1 4.0
Service .............................. 18.2 22.1 18.4
----- ----- -----
Total cost of revenues .......... 20.5 25.2 22.4
----- ----- -----

Gross margin ............................ 79.5 74.8 77.6

Operating expenses:
Sales and marketing .................. 49.0 56.6 63.8
Research and development ............. 12.8 15.1 14.6
General and administrative ........... 9.2 12.1 15.8
Non-recurring charges ................ 9.2 0.0 0.0
----- ----- -----
Total operating expenses ................ 80.2 83.8 94.2
----- ----- -----
Loss from operations .................... (0.7) (9.0) (16.6)
----- ----- -----
Other income, net ....................... 2.1 1.0 1.1
----- ----- -----

Income (loss) before provision for
(benefit from) income taxes ........ 1.4 (8.0) (15.5)
(Benefit from) provision for income taxes (8.0) 1.0 1.8
----- ----- -----
Net income (loss) ....................... 9.4% (9.0)% (17.3)%
----- ----- -----
----- ----- -----

</TABLE>

REVENUES

LICENSE. License revenues were $42,283, $28,970, and $23,676 in fiscal
1999, 1998 and 1997, respectively, representing increases of 46.0% from fiscal
1998 to fiscal 1999, and 22.4% from fiscal 1997 to fiscal 1998. The increase in
the Company's license revenues in each period was attributable primarily to
greater market acceptance of the Company's ROLAP engine which led to an increase
in volume, an increase in the average revenues derived from each license as the
average number of seats per customer increased, and an increase in sales
headcount. Also, the Company experienced an increase in direct sales of the IQ
suite of products from fiscal 1997 to fiscal 1999, which offset decreasing
indirect sales of these products. To date, price increases have not had a
significant impact on revenues. The Company does not believe that the historical
percentage growth rates of license revenues will be sustainable or are
indicative of future results. See also "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Cautionary Statement."

SERVICE. Service revenues include fees from maintenance contracts,
training and consulting services. Service revenues were $28,407, $21,325 and
$12,749 in fiscal 1999, 1998 and 1997, respectively, representing increases of
33.2% from fiscal 1998 to fiscal 1999, and 67.3% from fiscal 1997 to fiscal
1998. The Company anticipates that service revenues will continue to account for
a significant percentage of the Company's total revenues.

15
<PAGE>

INTERNATIONAL REVENUES. International revenues include revenues from
all countries other than the United States. International revenues from the
Company's direct sales organizations in Europe and export sales to or through
indirect channel partners in Europe and other areas outside of the United States
accounted for 19.1%, 19.9%, and 21.9% of total revenues in fiscal 1999, 1998 and
1997, respectively. The Company expects that international license and related
service revenues will continue to account for a significant portion of its total
revenues in the future. The Company has not experienced significant exposure to
foreign exchange rate changes. As the Company's foreign operations grow, there
can be no assurance that future foreign operational costs and the economic,
fiscal and monetary policies of foreign governments will not have a material
adverse effect on the Company's future results of operations or liquidity.

COST OF REVENUES

LICENSE. Cost of license revenues consists primarily of salaries,
product packaging, documentation and production. Cost of license revenues was
$1,601, $1,564, and $1,446 in fiscal 1999, 1998 and 1997, respectively. The
continuing decrease in cost of license revenues as a percent of revenues from
1997 through 1999 results from economies of scale.

SERVICE. Cost of service revenues consists primarily of
personnel-related and facilities costs incurred to provide customer support,
training and consulting services, as well as third-party costs incurred to
provide training and consulting services. Cost of service revenues was $12,854,
$11,113 and $6,724 in fiscal 1999, 1998 and 1997, respectively. The increases
each year were primarily due to the hiring of additional customer service
employees. The decrease in cost of service revenues as a percentage of service
revenues in fiscal 1999, 1998 and 1997 was primarily due to improved economies
of scale of the technical support center and increased productivity due to
growth in the number of increasingly experienced training, support and
consulting personnel.

OPERATING EXPENSES

SALES AND MARKETING. Sales and marketing expenses consist primarily of
salaries, commissions and bonuses earned by sales and marketing personnel, field
office expenses, travel and entertainment and promotional expenses. Sales and
marketing expenses were $34,636, $28,497 and $23,198 in fiscal 1999, 1998 and
1997, respectively. The increase in sales and marketing expenses was
predominantly due to the hiring of additional sales and marketing personnel and,
to a lesser extent, the increase in the number of sales offices and expanded
promotional activities. The decrease in sales and marketing expenses as a
percentage of total revenues was primarily due to the increased productivity of
the sales and marketing personnel as they became more experienced in selling the
Company's products. The Company expects that total sales and marketing expenses
will continue to increase as the Company continues to hire additional sales and
marketing personnel, establish additional sales offices and increase promotional
activities.

RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of salaries and benefits for software engineering personnel, payments
to contract programmers and expendable equipment purchases. Research and
development expenses were $9,065, $7,582 and $5,333 in fiscal 1999, 1998 and
1997, respectively. These increases were primarily attributable to hiring of
additional research and development personnel. The Company anticipates that it
will continue to devote substantial resources to research and development and
that these expenses will increase in future periods.

GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of salaries, professional fees, occupancy expenses and bad debt
expense. General and administrative expenses were $6,500, $6,083 and $5,764 in
fiscal 1999, 1998 and 1997, respectively. The increase was predominantly due to
increased staffing and, to a lesser extent, associated expenses necessary to
manage and support the Company's increased scale of operations. The decrease in
general and administrative expense as a percentage of revenues from 1997 through
1999 is attributable primarily to economies of scale. The Company believes that
its general and administrative expenses will increase in future periods as a
result of an expansion of the Company's administrative staff and facilities to
support its growing operations.

16
<PAGE>

NON-RECURRING CHARGES. Non-recurring charges for fiscal 1999 relate to
the Company's merger with IQ which was completed in September 1998. In
connection with the merger, the Company incurred direct transaction and other
related expenses of $6,500. Merger related expenses consisted of approximately
$3,250 of investment banking, legal and professional fees; approximately $1,650
of costs to combine and reorganize the operations of IA and IQ, principally
related to lease terminations and severance; approximately $700 of adjustments
to write-off certain intangible assets not utilized by the combined company; and
approximately $900 of other one-time merger related expenses.

OTHER INCOME. Other income represents interest earned by the Company on
its cash, cash equivalents and available-for-sale securities. The significant
increase in fiscal 1999 is the result of earnings from the investment of a large
portion of the net proceeds from IA's initial public offering completed in late
fiscal 1998.

INTEREST EXPENSE. Interest expense relates to long-term debt and
capitalized leases. Expense for 1998 and 1997 relate primarily to borrowings
held by IA. The decrease in 1999 is due to the repayment of substantially all
long-term debt from the proceeds of IA's initial public offering completed in
late fiscal 1998.

PROVISION FOR (BENEFIT FROM) INCOME TAXES. The benefit from income
taxes for fiscal 1999 represents primarily a reduction in the valuation
allowance associated with the Company's deferred tax assets. During fiscal 1999,
the Company reduced deferred tax valuation allowances and recorded current and
long-term deferred tax assets of $8,542. Deferred tax assets arise primarily
from net operating loss carryforwards and other timing differences. While the
combined Company incurred net losses in fiscal 1998 and 1997, such losses
related to the IA portion of the business and may not be used to offset the
pre-merger operating income of IQ.

RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1998 the Financial Accounting Standards Board issued FASB No.
133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. This
Statement establishes accounting and reporting standards for derivative
instruments and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. If certain conditions are
met, a derivative may be specifically designated as (a) a hedge of the exposure
to changes in the fair value of a recognized asset or liability or an
unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows
of a forecasted transaction, or (c) a hedge of the foreign currency exposure of
a net investment in a foreign operation, an unrecognized firm commitment, an
available-for-sale security, or a foreign-currency-denominated forecasted
transaction. Changes in the fair value of a derivative (that is, gains and
losses) are accounted for within earnings or as a component of other
comprehensive income, depending on the intended use of the derivative and the
resulting designation. This Statement is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999, but should not be applied
retroactively to financial statements of prior periods. Because the Company does
not currently utilize derivative instruments or hedges, the implementation of
this accounting standard will have no impact on the Company's results of
operations or financial condition.

LIQUIDITY AND CAPITAL RESOURCES

OPERATING ACTIVITIES: Net cash (used in) or provided by operating
activities was $(2,356), $2,282 and $(4,789) in fiscal 1999, 1998 and 1997,
respectively. For fiscal 1999, net cash used in operating activities resulted
primarily from increases in accounts receivable, partially offset by increases
in accrued liabilities and income taxes payable. For fiscal 1998, net cash
provided by operating activities resulted primarily from decreases in accounts
payable, accrued liabilities and deferred revenues. For fiscal 1997, net cash
used in operating activities resulted primarily from net operating losses and
increases in prepaid expenses and accounts receivable associated with increases
in revenues, partially offset by increases in accounts payable, accrued
liabilities and deferred revenues.

INVESTING ACTIVITIES: Net cash used in investing activities was $6,261,
$5,858 and $4,835 in fiscal 1999, 1998 and 1997, respectively. Since 1997, the
Company's investing activities have consisted primarily of purchases of property
and equipment and investments in marketable securities. In fiscal 1998, the
Company also received $1,800 in full repayment of a loan to an affiliate.
Capital expenditures, including those under capital leases, totaled

17
<PAGE>

$2,630, $1,801 and $1,132 in fiscal 1999, 1998 and 1997, respectively. Capital
leases are used to acquire property and equipment, primarily computer hardware,
for the Company's growing employee base. The Company expects that its capital
expenditures will continue to increase as the Company's employee base grows. At
January 31, 1999, the Company had no material commitments for capital
expenditures.

FINANCING ACTIVITIES: The Company's financing activities provided cash
flows of $828, $26,201 and $7,118 in fiscal 1999, 1998 and 1997, respectively.
In fiscal 1999, cash provided by financing activities came primarily from
proceeds of stock issued upon exercise of options and warrants offset by
payments on long-term debt.

In fiscal 1998, the cash provided by financing activities was comprised
of (1) an initial public offering of 3,834,100 shares (including an
overallotment of 500,100 shares) of Common Stock of IA which generated net
proceeds of $19,768, (2) proceeds from the sale of Series D Convertible
Redeemable Preferred Stock of $6,926, (3) proceeds from the exercise of stock
options and stock purchase warrants of $1,197, and (4) proceeds from borrowings
under lines of credit and long-term debt of $2,085, offset by net reduction of
debt under credit line borrowings and long-term borrowings of $3,775.

In fiscal 1997, the cash provided by financing activities was comprised
primarily of $4,880 received in connection with the sale of Series C Convertible
Redeemable Preferred Stock, $1,500 in proceeds from long-term debt, and $1,240
in proceeds from the exercise of stock options, offset by principal payments on
long-term debt of $502.

CREDIT ARRANGEMENTS: During fiscal 1999, the Company had a revolving
credit line of $2,000 and a $400 equipment note with a bank. In October 1997,
the Company borrowed $1,685 under the revolving line, bearing an annual interest
rate of 1.75% over the bank's prime lending rate. The Company used the proceeds
from the initial public offering to repay such indebtedness. The line of credit
expired in September 1998. There were no amounts outstanding under these
facilities as of January 31, 1999. See Note 4 of Notes to Consolidated Financial
Statements.

In April 1999, the Company renegotiated its line of credit. The
provisions of the new line of credit agreement include maximum borrowings of
$4,000, interest at the bank's prime lending rate, and customary financial
covenants. The Company has granted a first priority security interest in
substantially all of its assets as security for any borrowings under its line of
credit.

In March 1999, the Company signed a five-year lease on a new facility.
This lease requires base rental payments totaling approximately $2,961 over the
lease term.

The Company believes that its existing cash and cash equivalents will
be adequate to meet its cash needs for at least the next 12 months. If, in the
future, the Company requires additional financing, there can be no assurance
that additional financing will be available or that, if available, such
financing will be on terms favorable or acceptable to the Company. Nor can there
be assurance that any future financing will not be dilutive.

CAUTIONARY STATEMENT

INFORMATION ADVANTAGE, INC., OR PERSONS ACTING ON BEHALF OF THE
COMPANY, MAY MAKE, FROM TIME TO TIME, WRITTEN OR ORAL "FORWARD-LOOKING
STATEMENTS" AS DEFINED UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995 (THE "LITIGATION REFORM ACT"). THIS CAUTIONARY STATEMENT, WHEN USED IN
CONJUNCTION WITH AN IDENTIFIED FORWARD-LOOKING STATEMENT, IS INTENDED TO QUALIFY
THE FORWARD-LOOKING STATEMENT FOR THE "SAFE HARBOR" PROVISIONS OF THE LITIGATION
REFORM ACT. WE INTEND THIS CAUTIONARY STATEMENT TO BE A READILY AVAILABLE
WRITTEN DOCUMENT THAT CONTAINS FACTORS WHICH COULD CAUSE RESULTS TO DIFFER
MATERIALLY FROM SUCH FORWARD-LOOKING STATEMENTS. THESE FACTORS ARE IN ADDITION
TO ANY OTHER CAUTIONARY STATEMENTS, WRITTEN OR ORAL, WHICH MAY BE MADE, OR
REFERRED TO, IN CONNECTION WITH ANY SUCH FORWARD-LOOKING STATEMENT.

The following matters, among others, may have a material adverse effect
on the business, financial condition, liquidity, results of operations or
prospects, financial or otherwise, of the Company. Reference to this

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Cautionary Statement in the context of a forward-looking statement or statements
shall be deemed to be a statement that any one of more of the following factors
may cause actual results to differ materially from those in such forward-looking
statement or statements.

FLUCTUATIONS IN OPERATING RESULTS

The Company's continued reliance on large contracts in a portion of its
business will continue to result in fluctuations in operating results. A
significant portion of IA's revenues have been, and the Company believes a
significant portion of total revenues will continue to be, derived from a
limited number of orders placed by large organizations. The timing of such
orders has caused, and is expected to continue to cause, material fluctuations
in the Company's operating results, particularly on a quarterly basis. The
Company believes that period-to-period comparisons of its operating results are
not necessarily meaningful and should not be relied upon as indications of
future performance.

A significant portion of the Company's revenues is derived from
existing customers, including resellers. To the extent that such customers no
longer require new licenses or ongoing support, the Company's business,
financial condition and operating results could be materially adversely
affected.

The Company has often recognized a majority of its revenues in the
final month of a quarter, with these revenues frequently concentrated in the
last two weeks of a quarter. In addition, the Company does not operate with an
order backlog because its software products are typically shipped shortly after
orders are received, which makes product revenues in any quarter substantially
dependent on orders booked and shipped throughout that quarter. Accordingly,
revenues for any future quarter are difficult to predict.

The Company expects that as has been the case in the past, it will
experience weaker demand for its line of software products during the summer
months. Product revenues are also difficult to forecast because the market for
the Company's products is rapidly evolving, and the Company's sales cycle, which
may last from three to twelve months or more, varies substantially from customer
to customer.

The Company's expense level and plans for expansion, including its plan
to increase its sales and marketing and research and development efforts, are
based largely on the Company's expectations of future revenues and are
relatively fixed in the short-term. Consequently, if revenue levels are below
expectations, operating results are likely to be adversely and
disproportionately affected. In addition, the Company expects that sales derived
through indirect channels, which are more difficult to forecast and generally
have lower gross margins than direct sales, will increase as a percentage of
total revenues.

Based upon the factors described above, quarterly revenues, expenses
and operating results could vary significantly in the future. Therefore,
period-to-period comparisons of the Company's operating results are not
necessarily meaningful and, in any event, such comparisons should not be relied
upon as indications of future performance. Accordingly, the Company has limited
ability to forecast future revenues, and it is likely that in some future
quarter the Company's operating results will be below the expectations of public
market analysts and investors. If operating results are below expectations, or
if adverse conditions prevail or are perceived to prevail generally or with
respect to the Company's business, the price of the Company's Common Stock would
be materially adversely affected.

POTENTIAL EFFECTS OF YEAR 2000 ISSUES ON CUSTOMER PURCHASING PATTERNS

Management believes that the purchasing patterns of customers and
potential customers may be affected during calendar 1999 as companies expend a
significant portion of their limited information technology resources to correct
their current software systems for Year 2000 compliance. It is possible that
companies may curtail expenditures on software that they believe is not critical
to their continued operations and focus on repairing or upgrading only those
systems which they believe are mission critical. These expenditures may result
in reduced funds available to purchase software products such as those offered
by the Company. In addition, some companies may determine that, once they have
attained Year 2000 compliance internally, they will defer making any software

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purchases that would change their information systems until after January 1,
2000. While this shift in customer purchasing patterns may affect all Business
Intelligence software companies, it is possible that it could affect the Company
to an even greater extent because of the large dollar magnitude of the product
installations that the Company's customers often purchase. The deferral of
purchases of Business Intelligence products in favor of expenditures on Year
2000 issues by the Company's customers or potential customers could result in a
material adverse effect on the Company's business, operating results and
financial condition.

MANAGEMENT OF GROWTH

IA has experienced periods of rapid growth and expansion that have
placed and will continue to place significant strains upon its management
systems, resources and personnel. To compete effectively and manage anticipated
future growth, the Company must continue to implement and improve operational,
financial and management information systems on a timely basis and expand,
train, motivate and manage its work force. There can be no assurance that the
Company's personnel, systems, procedures and controls will be adequate to
support its operations.

The Company significantly increased its size in September 1998 with the
merger of the Company and IQ Software Corporation ("IQ"). IA and IQ entered into
the merger, among other reasons, in order to achieve potential mutual benefits
from combining each of their respective expertise, product lines and
distribution channels for the enterprise software market. Realization of these
potential benefits will require, among other things, integrating the companies'
respective product offerings and coordinating the companies' sales and marketing
and research and development efforts across geographically separated businesses.
IA and IQ each have different systems and procedures in many operational areas
that must be rationalized and integrated. There can be no assurance that such
integration will be accomplished effectively, expeditiously or efficiently.

FUTURE ACQUISITION-RELATED RISKS

A significant component of the Company's growth strategy is the
acquisition of complementary businesses, products and technologies that meet the
Company's criteria for revenues, profitability, growth potential and operating
strategy. While the Company does not anticipate any further acquisitions in the
near term, the successful implementation of this strategy depends on the
Company's ability to identify suitable acquisition candidates, acquire such
companies on acceptable terms and integrate their operations successfully with
those of the Company. There can be no assurance that the Company will be able to
identify suitable acquisition candidates or that the Company will be able to
acquire such candidates on acceptable terms. There also can be no assurance that
any such acquisition, if successfully consummated and integrated, will
ultimately prove advantageous for the Company.

LIMITED OPERATING HISTORY; HISTORY OF OPERATING LOSSES

IA was formed in 1992. Accordingly, the Company's prospects must be
considered in light of the risks and difficulties frequently encountered by
rapidly growing companies, particularly companies in new and rapidly evolving
markets. To address these risks, the Company must, among other things, respond
to competitive developments, continue to attract, retain and motivate qualified
personnel, and continue to enhance and improve its products.

IA has only recently achieved operating profitability on a quarterly
basis. It is possible that the Company may not generate sufficient net income to
fully utilize its net operating loss carryforwards before they begin to expire
in 2009. Utilization of these net operating loss carryforwards in the future by
the Company may be limited or deferred subject to Section 382 of the Internal
Revenue Code. Based upon management's estimates, IA's initial public offering
combined with the impact of the merger of IA and IQ resulted in a change of
ownership which limits the Company's utilization of the net operating loss
carryforwards to $4,000 per year.As of January 31, 1999, the Company had an
accumulated deficit of $9,312.

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Future operating results will depend on many factors, including, among
others:

- - demand for and acceptance of the Company's products and services, including
ongoing acceptance of maintenance and other services purchased by existing
customers,
- - the level of product and price competition,
- - the ability of the Company to control costs and to develop, market and
deploy new products,
- - the ability of the Company to expand its direct sales force and indirect
distribution channels both domestically and internationally,
- - the Company's success in attracting and retaining key personnel,
- - market acceptance of Business Intelligence (BI) products, and
- - the ability of the Company to successfully integrate technologies and
businesses it may acquire in the future.

Although the Company's revenues have increased in recent periods, there
can be no assurance that the Company's revenues will grow in future periods or,
if they do grow, that they will grow at past rates, or that the Company will be
able to maintain profitability on a quarterly or annual basis.

LENGTHY SALES AND IMPLEMENTATION CYCLES

The licensing of a portion of the Company's products typically involves
a significant commitment of capital and other resources, and is therefore
subject to delays frequently associated with customers' internal procedures to
approve large capital expenditures and to test and accept new technologies that
affect key operations. For these and other reasons, the sales cycle associated
with the licensing of a portion of the Company's products is typically three to
12 months and subject to a number of significant risks that are beyond the
Company's control, including customers' budgetary constraints and internal
acceptance reviews.

In addition, the time required to deploy the Company's products can
vary significantly with the needs of each customer and the complexity of a
customer's data processing needs. Accordingly, the deployment process of the
Company's products generally extends for several months and may involve a pilot
implementation, successful completion of which is typically a prerequisite for
full-scale deployment. In situations involving a pilot implementation, revenue
recognition is deferred until execution of a final license and the other
prerequisites for revenue recognition have been fulfilled.

Any delays in the implementation of the Company's products could have a
material adverse effect on the Company's business, operating results and
financial condition. In addition, any significant delay in the future
implementation of the Company's products could cause a customer to reject the
Company's software, which could impair the Company's reputation and have a
material adverse effect on the Company's business, operating results and
financial condition.

COMPETITION

The Company operates in a market which is intensely competitive, highly
fragmented and characterized by rapidly changing technology and evolving
standards.

The Company's current and prospective competitors offer a variety of
planning and analysis software solutions and generally fall within four
categories:

- - vendors of desktop OLAP software such as Cognos and Business Objects;
- - vendors of multidimensional OLAP software such as Oracle (Express), Arbor
Software, Seagate (Holos) and SAS;
- - vendors of OLAP/relational database software such as MicroStrategy and
Platinum Technology (Prodea); and
- - vendors of enterprise reporting software, such as Actuate, Business
Objects, Cognos, and Seagate (Crystal Reports).

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The Company has experienced and expects to continue to experience
increased competition from current and potential competitors, many of whom have
significantly greater financial, technical, marketing and other resources than
the Company. Such competitors may be able to respond more quickly to new or
emerging technologies and changes in customer requirements. Also, certain
current and potential competitors, including companies such as Microsoft, IBM,
Sybase and Informix, may have greater name recognition or more extensive
customer bases that could be leveraged. These companies could integrate
competing Business Intelligence software with other widely accepted products,
resulting in a loss of market share for the Company. 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.

DEPENDENCE ON GROWTH OF MARKET FOR BUSINESS INTELLIGENCE APPLICATIONS AND RISK
OF WEB-BASED USE

Although demand for the Company's products has grown in recent years,
the market for Business Intelligence software applications is still emerging and
there can be no assurance that it will continue to grow or that, even if the
market does grow, businesses will adopt the Company's products. Because a
significant portion of the Company's revenues are derived from existing customer
upgrades, the Company's business, operating results and financial condition
would be materially adversely affected by the failure of such upgrades to occur
due to the lack of continued adoption of Business Intelligence applications by
its installed customer base.

The Company has spent, and intends to continue spending, considerable
resources educating potential customers about the Company's products and their
functions and Business Intelligence generally. However, there can be no
assurance that such expenditures will enable the Company's products to achieve
any additional degree of market acceptance. If the market for the Company's
products fails to grow or grows more slowly than the Company currently
anticipates, the Company's business, operating results and financial condition
would be materially adversely affected.

Historically, the software industry has experienced significant
periodic downturns, often in connection with, or in anticipation of, declines in
general economic conditions during which management information systems budgets
often decrease. As a result, the Company's future business, operating results
and financial condition may reflect substantial fluctuations from period to
period as a consequence of patterns and general economic conditions in the
software industry.

RAPID TECHNOLOGICAL CHANGE AND NEW PRODUCTS

The market for the Company's products is characterized by rapid
technological change, frequent new product introductions and enhancements,
uncertain product life cycles, changing customer demands and evolving industry
standards. The introduction of products embodying new technologies and the
emergence of new industry standards can render existing products obsolete and
unmarketable. The Company believes that its future success will depend in large
part on its ability to:

- - support popular operating systems and databases,
- - maintain and improve its current product line,
- - develop new products on a timely basis that achieve market acceptance,
maintain technological competitiveness and meet an expanding range of
customer requirements, and
- - support the use of Web-based Business Intelligence products.

As a result of the complexities inherent in Business Intelligence,
major new products and product enhancements can require long development and
testing periods. In addition, customers may delay their purchasing decisions in
anticipation of the general availability of new or enhanced versions of the
Company's products. As a result, significant delays in the general availability
of such new releases or significant problems in the installation or
implementation of such new releases could have a material adverse effect on the
Company's business, operating results and financial condition. There can be no
assurance that the Company will be successful in developing and marketing, on a
timely and cost effective basis, product enhancements or new products that
respond to technological change, evolving industry standards or customer
requirements, that the Company will not experience difficulties that

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could delay or prevent the successful development, introduction or marketing of
these enhancements or that the Company's new products and product enhancements
will achieve market acceptance.

PRODUCT AND CUSTOMER CONCENTRATION

Historically, a substantial portion of IA's revenues have been
attributable to the ROLAP engine and related services. Such products and
services are currently expected to account for a substantial portion of the
Company's revenues for the foreseeable future. Consequently, a decline in the
demand for, or market acceptance of, the Company's products as a result of
competition, technological change or other factors, would have a material
adverse effect on the Company's business, operating results and financial
condition.

A relatively small number of customers have accounted for a significant
percentage of IA's revenues. While no single customer accounted for more than
10% of total revenues in fiscal 1999, 1998 or 1997, the Company expects that it
will continue to be dependent upon a limited number of new and existing
customers for a significant portion of its revenues in future periods. Such
customers are expected to vary from period to period. As a result, if the
Company fails to successfully sell its products or services to one or more
targeted new or existing customers in any particular period, or one or more of
these customers defers or cancels orders, the Company's business, operating
results and financial condition could be materially adversely effected. The loss
of a major customer, or any reduction in orders by such customer, would have a
material adverse effect on the Company's business, operating results and
financial condition.

DEPENDENCE ON SERVICE REVENUES

The Company licenses software and provides related services, which
consist of maintenance, support, training, consulting and implementation. Total
license revenues and service revenues have increased from year to year. Service
revenues represented 40.0%, 42.4% and 35.0% of total revenues for fiscal 1999,
1998 and 1997, respectively. The Company anticipates that service revenues will
continue to represent a significant percentage of total revenues.

To a large degree, the level of service revenues is dependent upon the
ongoing sales of professional services and the acceptance of maintenance
contracts by the Company's growing installed customer base. If service revenues
are less than anticipated, the Company's business, operating results and
financial condition could be materially adversely affected.

EXPANSION OF INDIRECT CHANNELS

The Company intends to expand its relationships with strategic
partners and to increase the proportion of the Company's customers licensed
through these indirect channels. Indirect channels have accounted for 13% to
24% of total revenues for the past three years. There can be no assurance
that the Company will continue to be represented by any of its indirect
channels.

The Company is currently investing, and intends to increasingly invest
in the future, significant resources to develop these channels, which could
adversely affect the Company's business, operating results and financial
condition if the Company's efforts do not generate significant license revenues.
There can be no assurance that the Company will be able to attract strategic
partners that will be able to market the Company's products effectively and will
be qualified to provide timely and cost-effective customer support and service.

The Company's ability to achieve revenue growth in the future will
depend in large part on its success in maintaining and establishing additional
relationships with strategic partners. The failure to recruit strategic partners
could adversely affect the Company's business, operating results and financial
condition. In addition, if it is successful in selling products through these
channels, the Company's gross margins will be negatively affected due to the
lower unit prices that the Company expects to receive when selling through
indirect channels.

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RISKS ASSOCIATED WITH INTERNATIONAL SALES AND OPERATIONS

During fiscal 1999, 1998 and 1997, the Company derived 19.1%, 19.9% and
21.9% of its total revenues, respectively, from sales outside the United States.
The Company anticipates that for the foreseeable future a significant portion of
its revenues will be derived from sources outside the United States.

The Company intends to continue to expand its sales and support
operations outside the United States and to enter additional international
markets. In order to successfully expand international sales, the Company must
establish additional foreign operations, expand its international channel
management and support organizations, hire additional personnel, recruit
additional international resellers and increase the productivity of existing
international resellers. To the extent that the Company is unable to do so in a
timely and cost-effective manner, the Company's growth, if any, in international
sales will be limited, and the Company's business, operating results and
financial condition could be materially adversely affected.

The Company also expects to commit additional resources to customizing
its products for selected international markets and developing international
channel sales and support organizations. In addition, even if international
operations are successfully expanded and the Company's products are successfully
customized, 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 operations are generally subject to a
number of risks, including:

- - costs of customizing products for foreign countries,
- - protectionist laws and business practices favoring local competition,
- - dependence on local vendors,
- - compliance with multiple, conflicting and
changing government laws and regulations,
- - longer sales and payment cycles,
- - import and export restrictions and tariffs,
- - difficulties in staffing and managing foreign operations,
- - greater difficulty or delay in accounts receivable collection,
- - foreign currency exchange rate fluctuations,
- - multiple and conflicting tax laws and regulations, and
- - political and economic instability.

To date, a majority of the Company's revenues and costs have been
denominated in U.S. dollars. However, the Company believes that an increasing
portion of the Company's revenues and costs will be denominated in foreign
currencies. Although the Company may from time to time undertake foreign
exchange hedging transactions to cover a portion of its foreign currency
transaction exposure, the Company does not currently attempt to cover any
foreign currency exposure.

MANAGEMENT OF GROWTH; NEED FOR ADDITIONAL QUALIFIED PERSONNEL

IA has recently experienced a period of significant revenue growth and
an expansion in the number of its employees, the scope of its operating and
financial systems and the geographic area of its operations. From January 31,
1995 to January 31, 1998, IA increased its headcount from 75 to 228. The merger
with IQ combined with IA's own internal hiring has increased the total headcount
of the Company to 457 at January 31, 1999.

Further significant increases in the number of employees are
anticipated in fiscal 2000. For example, the Company currently plans to expand
its sales and marketing services and research and development efforts by, among
other things, significantly increasing the number of employees dedicated to
those areas. This growth has resulted, and will continue to result, in new and
increased responsibilities for management personnel and may place a strain upon
the Company's management, operating financial systems and resources.

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The failure of the Company to manage its expansion effectively could
have a material adverse effect on the Company's business, operating results, and
financial condition.

DEPENDENCE ON KEY PERSONNEL

The Company's success depends to a significant degree upon the efforts
of certain key management, technical support, sales, marketing, customer support
and research and development personnel. The loss of any one of these key
personnel could adversely affect the Company. The Company believes that its
future success will depend in large part upon its continuing ability to attract
and retain highly skilled managerial, sales, marketing, customer support and
research and development personnel.

Like other software companies, the Company faces intense competition
for such personnel, and the Company has experienced and continues to experience
difficulty in recruiting qualified personnel. The loss of the services of one or
more of the Company's key individuals or failure to attract and retain
additional qualified personnel could have a material adverse effect on the
Company's business, operating results, and financial condition.

LIMITED PROTECTION OF PROPRIETARY TECHNOLOGY; RISKS OF INFRINGEMENT; USE OF
LICENSED TECHNOLOGY

The Company relies primarily on a combination of copyright and
trademark laws, trade secrets, confidentiality procedures and contractual
provisions to protect its proprietary technology. For example, IA licenses its
software pursuant to signed license agreements, which impose certain
restrictions on licensees' ability to utilize the software. In addition, the
Company seeks to avoid disclosure of its trade secrets, including requiring
those persons with access to the Company's proprietary information to execute
confidentiality agreements with the Company and restricting access to the
Company's source code. The Company seeks to protect its software, documentation
and other written materials under trade secret and copyright laws, which afford
only limited protection.

To date, the Company has not been notified that the Company's products
infringe the proprietary rights of third parties, but there can be no assurance
that third parties will not claim infringement by the Company with respect to
current or future products. The Company expects that data warehouse and data
mart software product developers will increasingly be subject to infringement
claims as the number of products and competitors in the Company's industry
segment grows and the functionality of products in different industry segments
overlaps. Any such claims, with or without merit, could be time-consuming,
result in costly litigation, cause product shipment delays or require the
Company to enter into royalty or licensing agreements. Such royalty or licensing
agreements, if required, may not be available on terms acceptable to the Company
or at all, which could have a material adverse effect on the Company's business,
operating results and financial condition.

IQ CLASS ACTION LITIGATION

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the U.S. District Court of the Northern District of Georgia, Atlanta Division,
before it becomes final. If the Company is unsuccessful in finalizing the
agreement and ultimately defending against the claim, the Company's business,
operating results and financial condition would be materially and adversely
affected.

RISK OF SOFTWARE DEFECTS

Software products as internally complex as those offered by the Company
frequently contain errors or defects, especially when first introduced or when
new versions or enhancements are released. Despite significant product quality
efforts, the Company has in the past released versions of its products with
defects and has discovered software errors in those products after their
introduction. Although the Company has not experienced material adverse effects
resulting from any such defects and errors to date, there can be no assurance
that defects and errors will not be found in new versions or enhancements after
commencement of commercial shipments. The discovery of such defects or errors
could result in loss of revenues or delay in market acceptance, which could have
a material adverse effect upon the Company's business, operating results and
financial condition.

YEAR 2000 READINESS DISCLOSURE

The Company is presently assessing its Year 2000 readiness for
operations worldwide, focusing on critical operating and applications systems,
particularly the Year 2000 compliance of: (a) product lines, (b) key
software/hardware vendors, and (c) financial accounting systems.

The Company believes that its products are Year 2000 compliant. With
respect to other areas of its operations, the Company has performed an initial
high-level assessment of mission critical systems that will require Year 2000
modification. During this initial assessment, the Company determined that Year
2000 issues exist with regard to its internal financial reporting application,
its voicemail system, and one stand-alone component of the sales transaction
process. The Company plans to replace or modify each of these systems during
calendar 1999.

During the second quarter of calendar 1999, management plans to use
internal staff, supplemented by consultants, to conduct a more thorough,
detailed analysis of remaining systems, including all personal computers, the
computer networking hardware and software, the electronic mail system, and
non-IT systems such as building security and climate control systems. The
Company plans to conduct Year 2000 readiness testing and take appropriate action
during the last half of calendar 1999 to correct any remaining Year 2000 issues
that arise during this second quarter review.

The Company uses outside vendors to supply its most significant
financial accounting software. As part of the integration of IQ, the Company is
currently in the process of converting its financial application to a platform
that is Year 2000 compliant. The replacement of the voicemail system and the
stand-alone component of the sales transaction process is still in the planning
phase, and no reliable estimate of the ultimate cost has been determined.
However, the Company believes that its internal Year 2000 issues are of lesser
complexity than other industries that may have huge, custom-programmed legacy
computer systems or numerous embedded microprocessors controlling complex
processes. Replacements for any of the Company's non-compliant internal systems
are commercially available, and will be purchased and installed as necessary
during calendar 1999.

To date, all remediation efforts have been conducted by internal
staff, and the costs incurred have not been material. The Company intends to
complete its Year 2000 remediation efforts with both internal resources and
external consultants. The Company believes it has sufficient liquidity to
fund the internal Year 2000 remediation described above. The Company believes
that capital expenditures related to replacing non-compliant systems may
exceed $1,000. Management believes that the expense related to completing the
Company's readiness assessment will not exceed $250.

During the second quarter of calendar 1999, the Company intends to
perform a compliance survey of its critical vendors. The critical external
systems on which the Company's operations, both domestically and
internationally, depend include:

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- - telephone systems,
- - utilities, such as electricity and water,
- - airline transportation,
- - delivery and courier services,
- - product packaging manufacturers,
- - payroll processing providers, and
- - financial institutions.

The Company intends to develop alternative sources of these critical
services, as necessary and where available, based on the results of its survey.
In the event that any such key suppliers do not achieve Year 2000 compliance in
a timely manner, or at all, and a suitable replacement service cannot be located
(for example, electrical power), the Company's business or operations could be
adversely affected.

The Company recognizes the need for Year 2000 contingency plans in the
event that remediation is not fully successful or that the remediation efforts
of its vendors, suppliers and governmental/regulatory agencies are not completed
in a timely manner. To the extent possible, the Company will develop alternative
relationships to ensure the availability of critical products and services, or
will implement alternative means of packaging, selling and delivering its
products. The Company intends to more formally address contingency planning
during the second half of calendar 1999, following its completion of its
detailed readiness and risk assessment.

The Company recognizes that issues related to Year 2000 constitute a
material known uncertainty. Except as discussed above, the Company is not aware
of any potential material adverse effects which could result from these issues.
There can be no assurance that the processes described above can be completed on
the timetable described above or that remediation will be fully effective. The
Company's failure to identify and remediate Year 2000 issues, or the failure of
customers, key vendors or other critical third parties who do business with the
Company to timely remediate their Year 2000 issues could cause system failures
or errors, business interruptions or, in a worst case scenario, the inability to
engage in normal business practices for an unknown length of time. The effect on
the Company's operations, income and financial condition could be materially
adverse.

PRODUCT LIABILITY

Although the Company's license agreements with its customers typically
contain provisions designed to limit the Company's exposure to potential product
liability claims, it is possible that such limitation of liability provisions
may not be effective as a result of existing or future laws or unfavorable
judicial decisions. The Company has not experienced any product liability claims
to date. However, the sale and support of the Company's products may entail the
risks of such claims, which are likely to be substantial in light of the use of
the Company's products in business-critical applications. A product liability
claim brought against the Company could have a material adverse effect on the
Company's business, operating results and financial condition.

POTENTIAL VOLATILITY OF STOCK PRICE

The market price of the Common Stock is likely to be highly volatile
and may be significantly affected by factors including, but not limited to:

- - actual or anticipated fluctuations in the Company's operating results,
- - announcements of technological innovations, new products or new contracts
by the Company or its competitors,
- - developments with respect to copyrights or proprietary rights,
- - conditions and trends in the software and other technology industries,
- - adoption of new accounting standards affecting the software industry,
- - changes in financial estimates by securities analysts,
- - market perceptions of Year 2000 effects on the software industry,
- - general market conditions, and
- - unanticipated events or announcements.

27
<PAGE>

In addition, the stock market has from time to time experienced
significant price and volume fluctuations that have particularly affected market
prices for common stocks of technology companies. In the past, following periods
of volatility in the market price of a particular company's securities,
securities class action litigation has often been brought against such company.
Such litigation is currently pending against IQ, and there can be no assurance
that such litigation will not occur in the future with respect to the Company.
Such litigation could result in substantial costs and a diversion of
management's attention and resources, which could have a material adverse effect
upon the Company's business, operating results and financial condition.

CONTROL OF COMPANY BY EXECUTIVE OFFICERS, DIRECTORS AND FIVE PERCENT
STOCKHOLDERS

The executive officers, directors, five-percent stockholders and their
affiliates in the aggregate beneficially own approximately 21% of the
outstanding Common Stock. As a result, these stockholders may effectively
exercise control over all matters requiring stockholder approval, including the
election of directors and approval of significant corporate transactions. Such
concentration of ownership may have the effect of delaying or preventing a
change in control of the Company.

EFFECT OF CERTAIN CHARTER PROVISIONS; ANTITAKEOVER EFFECTS OF CERTIFICATE OF
INCORPORATION, BYLAWS, DELAWARE LAW AND RIGHTS AGREEMENT

The Company's Certificate of Incorporation, as amended and restated,
and Bylaws, as amended, contain certain provisions that may have the effect of
discouraging, delaying or preventing a change in control of the Company or
unsolicited acquisition proposals that a stockholder might consider favorable,
including provisions:

- - authorizing the issuance of "blank check" Preferred Stock,
- - requiring the consent of holders of at least 80% of the Company's capital
stock to amend the Certificate of Incorporation or Bylaws,
- - eliminating the ability of stockholders to act by written consent or call a
special meeting of stockholders and
- - providing for a Board of Directors with staggered, three-year terms.

In addition, certain provisions of Delaware law and the Company's 1997
Equity Incentive Plan (the "Plan") may also have the effect of discouraging,
delaying or preventing a change in control of the Company or unsolicited
acquisition proposals. The antitakeover effect of these provisions may also have
an adverse effect on the public trading price of the Company's Common Stock.

On February 25, 1999, the Board of Directors declared a dividend of one
preferred share purchase right (a "Right") to purchase one one-hundredth of a
share of the Company's Series A Junior Participating Preferred Stock, par value
$0.01 per share (the "Preferred Shares"), for each share of the Company's Common
Stock outstanding as of the close of business on March 15, 1999. Each right will
entitle the registered holder to purchase from the Company, under certain
conditions, one one-hundredth of a Preferred Share at an initial price of
$60.00. The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to anyone attempting to acquire the Company in a hostile
takeover. The Rights should not interfere with any merger or other business
combination approved by the Board of Directors since the Board of Directors may,
at its option and in its sole discretion, redeem the Rights as provided in the
Rights Agreement.

SHARES ELIGIBLE FOR FUTURE SALE

Future sales of a substantial number of shares of Common Stock could
adversely affect the market price of the Common Stock and could impair the
Company's ability to raise capital through the sale of equity securities. As of
March 31,1999, the Company had outstanding 25,022,259 shares of Common Stock.
Substantially all of these shares are freely tradable without registration or
further restriction unless purchased by affiliates. Of the outstanding shares
which have not been registered, certain stockholders holding approximately
10,401,890 shares of Common Stock (assuming the exercise of warrants to purchase
30,000 shares of Common Stock held by holders of registration rights) are
entitled to demand registration of their shares of Common Stock. By exercising
their demand

28
<PAGE>

registration rights, such stockholders could cause a large number of securities
to be registered and sold in the public market, which could have an adverse
effect on the market price of the Common Stock.

In addition, as of March 31, 1999, there were outstanding warrants to
purchase 158,419 shares of Common Stock and options to purchase 4,908,081 shares
of Common Stock under various stock option plans.

The Company has issued options and warrants to acquire Common Stock at
prices below the current market price of its Common Stock. To the extent such
outstanding options and warrants are exercised, stockholders will incur
substantial dilution.

DISCRETION IN USE OF INITIAL PUBLIC OFFERING PROCEEDS

The primary purposes of the Company's initial public offering were to
increase the Company's equity capital, to create a public market for the
Company's Common Stock and to facilitate future access to public markets. As of
March 31, 1999, the Company had no specific plans to use the remaining net
proceeds from the initial public offering other than for the repayment of
indebtedness, general corporate purposes, including working capital and
expansion of the Company's sales, marketing and customer support infrastructure,
and potential future acquisition of businesses, products and technologies that
complement the Company's business. Accordingly, the Company's management retains
broad discretion as to the allocation of a substantial portion of the net
proceeds from the initial public offering. Pending any such uses, the Company
has invested the remaining net proceeds in investment-grade, interest-bearing
securities.

ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk represents the risk of changes in value of a financial
instrument, derivative or non-derivative, caused by fluctuations in interest
rates, foreign exchange rates and equity prices.

The Company's primary market risk is interest rate risk. The Company
minimizes such risk by investing in accordance with established policies. The
Company does not engage in derivative transactions, and no financial instrument
transactions are entered into for hedging purposes. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Revenues."

Because the Company's total cash and investments exceed outstanding
short and long-term debt, exposure to interest rate risk relates primarily to
the Company's investment portfolios. Most of the investments are fixed-rate
municipal or U.S. government securities. The Company actively manages
investments to increase returns on investment, but, in order to ensure
liquidity, invests only in instruments having high credit quality where a
secondary market exists.

The market risk sensitivity analysis performed by management estimates
the hypothetical change in fair value of those financial instruments held by the
Company at January 31, 1999, which are sensitive to changes in interest rates.
Market risk is estimated as the potential change in fair value resulting from an
immediate hypothetical one-half of one percentage point change in market
interest rates. The fair values of the Company's investments are based on quoted
market prices. As the carrying amounts of investments with maturities of less
than 90 days approximate their fair value, these are excluded from the
sensitivity analysis. The fair value of the Company's fixed rate investments
whose remaining maturities exceed 90 days is $10,667. Although not expected in
the immediate future, a 0.5 percentage point increase in market interest rates
would decrease the fair value of such investments by approximately $965.

29
<PAGE>

ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INFORMATION ADVANTAGE, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page
----

<S> <C>
Report of Independent Accountants........................................ 31
Report of Independent Auditors........................................... 32
Consolidated Financial Statements:
Consolidated Balance Sheet as of January 31, 1999 and 1998............. 33
Consolidated Statement of Operations for the Years Ended
January 31, 1999, 1998 and 1997........................................ 34
Consolidated Statement of Stockholders' Equity for
the Years Ended January 31, 1999, 1998 and 1997....................... 35
Consolidated Statement of Cash Flows for the Years Ended
January 31, 1999, 1998 and 1997....................................... 36
Notes to Consolidated Financial Statements............................. 37

</TABLE>

30
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Information Advantage, Inc.

In our opinion, based upon our audits and the report of other auditors, the
accompanying consolidated balance sheets and the related consolidated statements
of operations, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of Information Advantage, Inc. and its
subsidiaries at January 31, 1999 and 1998, and the results of their operations
and their cash flows for each of the three years in the period ended January 31,
1999, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements of IQ Software
Corporation, a wholly owned subsidiary, for the years ended January 31, 1998 and
1997. Those statements, which were audited by other auditors, reflect total
assets of $28.3 million at January 31, 1998, and net income of $2.0 million and
$2.2 million for the years ended January 31, 1998 and 1997, respectively. The
report of the other auditors has been furnished to us, and our opinion expressed
herein, insofar as it relates to the amounts included for IQ Software
Corporation, is based solely on the report of the other auditors. We conducted
our audits of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits and the report of other auditors provide a reasonable basis for the
opinion expressed above.

/s/ PRICEWATERHOUSECOOPERS LLP

Minneapolis, Minnesota
March 3, 1999

31
<PAGE>

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders
IQ Software Corporation

We have audited the consolidated balance sheet of IQ Software Corporation and
subsidiaries (the Company) as of January 31, 1998, and the related
consolidated statements of operations, shareholders' equity and cash flows
for each of the two years in the period ended January 31, 1998 (not presented
separately herein). These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements 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 IQ
Software Corporation and subsidiaries at January 31, 1998, and the consolidated
results of their operations and their cash flows for each of the two years in
the period ended January 31, 1998, in conformity with generally accepted
accounting principles.

/s/ ERNST & YOUNG LLP

Atlanta, Georgia
February 20, 1998

32
<PAGE>

INFORMATION ADVANTAGE, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

January 31
----------
1999 1998
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ...................... $ 20,041 $ 27,765
Available-for-sale securities .................. 12,725 9,177
Accounts receivable, net ....................... 23,534 13,176
Prepaid expenses and other current assets ...... 1,363 1,572
Current deferred tax assets, net ............... 5,812 --
-------- --------

Total current assets ....................... 63,475 51,690
Computers, furniture and office equipment, net .... 4,111 3,856
Long-term deferred taxes and other assets ......... 3,621 3,700
-------- --------
$ 71,207 $ 59,246
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion--long-term debt ................ $ 187 $ 349
Accounts payable ............................... 1,918 2,200
Accrued expenses ............................... 9,752 4,178
Deferred revenue ............................... 6,910 7,707
-------- --------

Total current liabilities .................. 18,767 14,434
Long-term liabilities, less current portion ....... 583 743
-------- --------

Total liabilities .......................... 19,350 15,177
-------- --------

COMMITMENTS AND CONTINGENCIES (NOTES 6 and 8)

Stockholders' equity:
Common stock, $0.01 par value; 60,000,000 shares
authorized; 24,992,809 and 24,654,370 shares
issued and outstanding, respectively ....... 250 247
Additional paid-in-capital ..................... 60,962 59,788
Accumulated other comprehensive income ......... (43) 13
Accumulated deficit ............................ (9,312) (15,979)
-------- --------

Total stockholders' equity ................. 51,857 44,069
-------- --------

$ 71,207 $ 59,246
-------- --------
-------- --------
</TABLE>

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

33
<PAGE>

INFORMATION ADVANTAGE, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Years Ended January 31
---------------------------------
1999 1998 1997

<S> <C> <C> <C>
Revenues:

License ...................................... $ 42,283 $ 28,970 $ 23,676
Service ...................................... 28,407 21,325 12,749
-------- -------- --------
Total revenues ........................... 70,690 50,295 36,425
-------- -------- --------

Cost of revenues:

License ...................................... 1,601 1,564 1,446
Service ...................................... 12,854 11,113 6,724
-------- -------- --------
Total cost of revenues ................... 14,455 12,677 8,170
-------- -------- --------
Gross margin .................................... 56,235 37,618 28,255
-------- -------- --------

Operating expenses:

Sales and marketing .......................... 34,636 28,497 23,198
Research and development ..................... 9,065 7,582 5,333
General and administrative ................... 6,500 6,083 5,764
Merger-related expenses ...................... 6,502 -- --
-------- -------- --------
Total operating expenses ................. 56,703 42,162 34,295
-------- -------- --------

Loss from operations ............................ (468) (4,544) (6,040)

Other income, primarily investment earnings ..... 1,522 753 642
Interest expense ................................ (31) (247) (244)
-------- -------- --------
Income (loss) before income taxes ............... 1,023 (4,038) (5,642)

(Benefit from) provision for income taxes ....... (5,644) 506 669
-------- -------- --------
Net income (loss) ............................... $ 6,667 $ (4,544) $ (6,311)
-------- -------- --------
-------- -------- --------

Income (loss) per share:
Basic ........................................ $ 0.27 $ (0.38) $ (0.63)
-------- -------- --------
-------- -------- --------

Diluted ...................................... $ 0.25 $ (0.38) $ (0.63)
-------- -------- --------
-------- -------- --------

Shares used in computing income (loss) per share:
Basic ........................................ 24,776 12,030 10,011
-------- -------- --------
-------- -------- --------
Diluted ...................................... 26,880 12,030 10,011
-------- -------- --------
-------- -------- --------
</TABLE>

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

34
<PAGE>

INFORMATION ADVANTAGE, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Other Total
------------------------ Paid-in Comprehensive Accumulated Stockholders'
Shares Amount Capital Income Deficit Equity
----------- --------- ----------- -------------- ------------ -------------

<S> <C> <C> <C> <C> <C> <C>
Balance, January 31, 1996 ..... 9,789,343 $ 98 $ 12,166 $ (194) $ (5,006) $ 7,064
Preferred stock issuance
costs ..................... (44) (44)
Translation adjustments ..... -- -- -- 116 -- 116
Unrealized gain on
marketable securities
available for sale......... -- -- -- 20 -- 20
Net loss .................... -- -- -- -- (6,311) (6,311)
-----------
Comprehensive income for
fiscal 1997 .............. (6,219)
Stock options ............... 379,154 4 1,311 -- -- 1,315
Tax benefit from
exercise of
non-qualified stock options
and disqualifying
dispositions of incentive
stock options ............. -- -- 353 -- -- 353
----------- -------- ----------- ----------- ----------- -----------
Balance, January 31, 1997 ..... 10,168,497 102 13,830 (58) (11,361) 2,513
Preferred stock issuance
costs ..................... -- -- -- -- (74) (74)
Translation adjustments ..... -- -- -- 39 -- 39
Unrealized gain on
marketable securities
available for sale ...... -- -- -- 32 -- 32
Net loss .................... -- -- -- -- (4,544) (4,544)
-----------
Comprehensive income for
fiscal 1998 ............... (4,547)
Proceeds from initial public,
net of offering costs .... 3,834,100 38 19,730 -- -- 19,768
Preferred stock converted
to common.................. 9,483,334 95 24,315 -- -- 24,410
Stock options ............... 271,551 3 1,077 -- -- 1,080
Stock purchase warrants
exercised ................. 896,888 9 799 -- -- 808
Tax benefit from exercise of
non-qualified stock
options and disqualifying
dispositions of incentive
stock options ............. -- -- 37 -- -- 37
----------- -------- ----------- ----------- ----------- -----------
Balance, January 31, 1998 ..... 24,654,370 247 59,788 13 (15,979) 44,069
Translation adjustments ..... -- -- -- (104) -- (104)
Unrealized gain on
marketable securities
available for sale ...... -- -- -- 48 -- 48
Net income .................. -- -- -- -- 6,667 6,667
-----------
Comprehensive income for
fiscal 1999 .............. 6,611
Stock options and stock
purchase warrants ......... 164,355 1 277 -- -- 278
Issuance of stock under
employee stock purchase
plan ...................... 174,084 2 897 -- -- 899
----------- -------- ----------- ----------- ----------- -----------
Balance, January 31, 1999 ..... 24,992,809 $ 250 $ 60,962 $ (43) $ (9,312) $ 51,857

----------- -------- ----------- ----------- ----------- -----------
----------- -------- ----------- ----------- ----------- -----------
</TABLE>

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

35
<PAGE>

INFORMATION ADVANTAGE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 6,667 $ (4,544) $ (6,311)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation and amortization 3,600 3,369 2,455
Provision for doubtful accounts 1,125 824 952
Acquired research and development costs -- 280 --
Changes in operating assets and liabilities:
Accounts receivable (11,306) (2,738) (4,802)
Deferred income taxes (7,577) (159) (155)
Prepaid expenses and other current assets 39 43 (241)
Accounts payable (981) 1,052 (253)
Accrued expenses 5,670 1,061 1,102
Deferred revenue (682) 2,631 2,060
Income tax payable 1,056 442 454
Other assets and liabilities 33 21 (50)
-------- -------- --------
Net cash (used) provided by operating activities (2,356) 2,282 (4,789)
-------- -------- --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to computers, furniture and office equipment (2,630) (1,801) (1,132)
Additions to capitalized software costs (148) (1,001) (805)
Proceeds under Note receivable from affiliate -- 1,800 --
Payments for acquisitions -- (656) (563)
Purchases of marketable securities (3,500) (4,212) (2,324)
Other investing activities 17 12 (11)
-------- -------- --------
Net cash used by investing activities (6,261) (5,858) (4,835)
-------- -------- --------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Information Advantage initial
public offering, net -- 19,768 --
Proceeds from exercise of stock options and stock
purchase warrants and issuance of stock under
employee stock purchase plan 1,177 1,197 1,240
Proceeds from sale of convertible redeemable
preferred stock, net of expenses -- 6,926 4,880
Borrowings under lines of credit -- 1,685 --
Repayments on lines of credit -- (1,685) --
Proceeds from long-term debt -- 400 1,500
Principal payments on long-term debt (349) (2,090) (502)
-------- -------- --------
Net cash provided by financing activities 828 26,201 7,118
-------- -------- --------
Effect of exchange rates on cash 65 7 67
-------- -------- --------
Net (decrease) increase in cash and cash equivalents (7,724) 22,632 (2,439)
Cash and cash equivalents, beginning of year 27,765 5,133 7,572
-------- -------- --------
-------- -------- --------
Cash and cash equivalents, end of year $ 20,041 $ 27,765 $ 5,133
-------- -------- --------
-------- -------- --------

SUPPLEMENTAL CASH FLOW INFORMATION:

Cash paid during the year for interest $ 31 $ 259 $ 240
-------- -------- --------
-------- -------- --------
Cash paid during the year for income taxes $ 732 $ 549 $ 381
-------- -------- --------
-------- -------- --------
</TABLE>

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

36
<PAGE>

INFORMATION ADVANTAGE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 1 BUSINESS AND ORGANIZATION

Information Advantage, Inc. ("IA" or the "Company") develops,
markets and supports a comprehensive suite of enterprise-scalable Business
Intelligence software that is designed to allow large numbers of users to access
and analyze large amounts of data to make quick and more informed business
decisions. The Company's Internet-based Business Intelligence solution,
MyEureka!, combines a Business Intelligence portal with powerful, robust and
flexible reporting and analysis processing capabilities to provide easy access
to all business information and transform raw data into meaningful information.
The Company also provides a comprehensive range of related training, consulting
and customer support services.

In December 1997, IA completed an initial public offering of its common
stock, which generated $19,768 net proceeds. A portion of the net proceeds was
used to repay in full the Company's lines of credit and subordinated debt. In
addition, concurrent with the offering, the Company's convertible preferred
stock and substantially all stock purchase warrants were converted to common
stock.

In September 1998, the Company completed a merger with IQ Software
Corporation ("IQ"), a software development company which develops and markets a
suite of business intelligence products and related services. The merger was
accounted for as a pooling of interests. As a result of the merger, the Company
issued 9,177,622 shares of its Common Stock to the stockholders of IQ. The
accompanying financial statements have been presented to reflect the balance
sheets, results of operations and cash flows of the companies as if they had
been combined from the earliest date presented.

The following presents the separate results, in each of the periods
presented, of the Company (excluding the results of IQ prior to the date on
which it was acquired) and IQ up to the date on which the merger was completed:

The
Company IQ Total
---------- -------- --------
<S> <C> <C> <C>
FOR THE YEAR ENDED
JANUARY 31, 1997:
Revenues $ 11,747 $ 24,678 $ 36,425
Net income (loss) (8,475) 2,164 (6,311)

FOR THE YEAR ENDED
JANUARY 31, 1998:
Revenues $ 25,590 $ 24,705 $ 50,295
Net income (loss) (6,520) 1,976 (4,544)

FOR THE PERIOD ENDED
SEPTEMBER 24, 1998:
Revenues $ 23,865 $ 16,456 $ 40,321
Net income (loss) (663) 503 (160)

</TABLE>

37
<PAGE>

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The consolidated financial statements include accounts of the Company and
wholly-owned subsidiaries operating in France, Australia, Holland, the United
Kingdom and Germany. All significant intercompany accounts and transactions have
been eliminated.

REVERSE STOCK SPLIT

On October 8, 1997, the Company's Board of Directors approved a reverse
1-for-2 1/2 stock split which became effective on December 3, 1997. The effect
of the reverse stock split has been reflected for all periods presented in the
accompanying financial statements.

REVENUE RECOGNITION

Revenues derived from software licenses are recognized upon (a) the
execution of a license agreement, (b) delivery of the related software product
(c) reasonable assurance of customer acceptance of the software and
collectibility of the receivable, and (d) fulfillment of any other of the
Company's contract obligations. For software provided for demonstration or pilot
purposes, or where significant post-delivery obligations exist, revenues are
deferred until execution of a license agreement and fulfillment of all revenue
recognition requirements. Revenues derived from maintenance contracts that are
bundled with the initial licenses and all revenues from extended maintenance
contracts are deferred and recognized ratably over the term of the maintenance
contract. Revenues from maintenance contracts are included in services revenues
in the accompanying consolidated statement of operations. Revenues from training
and consulting services are recognized as the services are performed. The
Company's policy is in compliance with the provisions of the American Institute
of Certified Public Accountants' Statement of Position (SOP) 97-2, "Software
Revenue Recognition."

RESEARCH AND DEVELOPMENT

Expenditures of the combined company for research and software development
are expensed as incurred from the date of the merger forward. Such costs are
required to be expensed until the point that technological feasibility of the
product is established and the realizability of any capitalized costs is
determined. A working model or a detailed program design evidences technological
feasibility. The period between achieving technological feasibility and the
general availability to the public of such software has historically been short.
Consequently, costs otherwise capitalizable after technological feasibility is
achieved have been expensed because they have been insignificant to both total
assets and net income (loss).

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
(including the disclosure of contingent assets and liabilities) as of the
balance sheet date and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

FOREIGN CURRENCY TRANSLATION

All assets and liabilities of the Company's foreign subsidiaries are
translated from local currencies to U.S. dollars at period end rates of
exchange, while the consolidated statement of operations is translated at the
average exchange rates during the period. The functional currency for each of
the Company's foreign subsidiaries is the respective local currency. Translation
adjustments arising from the translation of net assets located outside of the
United States into U.S. dollars are recorded as a separate component of
stockholders' equity. Transaction gains or losses on sales to foreign customers
which are denominated in their local currencies are recorded in the statement of
operations. The Company has not experienced any material transaction gains or
losses.

38
<PAGE>

FAIR VALUE OF FINANCIAL INSTRUMENTS

Cash and cash equivalents consist of cash, money market instruments and
U.S. Government Treasury Bills having original maturities less than 90 days.
Cash and money market instruments are stated at their fair values. Treasury
Bills are considered "held-to-maturity" and are stated at their amortized cost
which approximates fair value.

The estimated fair values of the Company's cash and cash equivalents at
January 31 are as follows:

1999 1998
------- -------
<S> <C> <C>
Cash and money market instruments $12,090 $10,262
U.S. government treasury bills 7,951 17,503
------- -------
$20,041 $27,765
------- -------
------- -------
</TABLE>

The Company accounts for marketable securities in accordance with the
provisions of Statement of Financial Accounting Standards (SFAS) No. 115. SFAS
No. 115 addresses the accounting and reporting for investments in fixed maturity
securities and for equity securities with readily determinable fair values.
Management determines the appropriate classification of debt securities at the
time of purchase and reevaluates such designation as of each balance sheet date.
Currently, all debt securities with original maturity dates of greater than 90
days are classified as available-for-sale. Available-for-sale securities are
carried at fair value as determined by quoted market prices, with unrealized
gains and losses, net of tax, reported within a separate component of
stockholders' equity. Interest and dividends on securities classified as
available-for-sale are included in investment income. All available-for-sale
securities are classified as current since they are available for use in the
Company's current operations.

The following is a summary of available-for-sale securities at January 31,
1999 and 1998:

Gross Estimated
Unrealized Fair
Cost Gain Value
------- ------- -------
<S> <C> <C> <C>
JANUARY 31, 1999
Debt securities $12,383 $ 74 $12,457
Equity securities 250 18 268
------- ------- -------
$12,633 $ 92 $12,725
------- ------- -------
------- ------- -------
JANUARY 31, 1998
Debt securities $ 8,844 $ 75 $ 8,919
Equity securities 250 8 258
------- ------- -------
$ 9,094 $ 83 $ 9,177
------- ------- -------
------- ------- -------
</TABLE>

The adjustment to accumulated other comprehensive income related to
unrealized holding gains on available-for-sale securities included as a separate
component of stockholders' equity totaled $101 and $53, net of deferred taxes,
as of January 31, 1999 and 1998, respectively.

39
<PAGE>

Except for U.S. Government Treasury bills purchased with original
maturities of 90 days or less, which are classified as cash equivalents, as of
January 31, 1999 and 1998, the Company had no marketable securities considered
held-to-maturity. The amortized cost and estimated fair market value of debt
securities at January 31, 1999 by contractual maturity are as follows:

Estimated
Fair
Cost Value
------- -------
<S> <C> <C>
Due in 1 year or less $ 4,095 $ 4,147
Due after 1 year through 3 years 3,979 3,996
Due after 3 years 4,309 4,314
------- -------
$12,383 $12,457
------- -------
------- -------
</TABLE>

SIGNIFICANT CUSTOMERS AND CONCENTRATION OF CREDIT RISK

Financial instruments which potentially subject the Company to credit risk
consist primarily of accounts receivable. The Company grants credit to customers
in the ordinary course of business. No individual customers accounted for over
10% of revenues during fiscal 1999, 1998 or 1997. There were no individual
customer receivable balances greater than 10% of total receivables at January
31, 1999 or 1998.

Accounts receivable are stated net of the related allowance for doubtful
accounts of $1,516 and $1,030 as of January 31, 1999 and 1998, respectively.

COMPUTERS, FURNITURE AND OFFICE EQUIPMENT

Computers, furniture and office equipment, including those assets acquired
under capital leases, are depreciated using the straight-line method over the
estimated useful lives of the assets, which generally range from 3 to 5 years.
Significant additions or improvements extending asset lives are capitalized,
while repairs and maintenance are charged to expense as incurred. Amortization
of assets under capital leases is included in depreciation expense. The amount
of leased equipment consists of the following:

<TABLE>
<CAPTION>
T
JANUARY 31
---------------------
1999 1998
------- -------
<S> <C> <C>
Equipment cost $ 1,285 $ 1,191
Less: Accumulated amortization (1,048) (689)
------- -------
$ 237 $ 502
------- -------
------- -------
</TABLE>

INCOME TAXES

Income taxes are accounted for under the liability method in accordance
with SFAS No. 109, "Accounting for Income Taxes." Under the liability method,
deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities reduced
by a valuation allowance, as necessary.

40
<PAGE>

INCOME (LOSS) PER SHARE

The Company accounts for income (loss) per share in accordance SFAS No.
128, "Earnings Per Share." SFAS No. 128 applies to entities with publicly held
common stock, and requires dual presentation of basic and diluted earnings per
share for entities with complex capital structures. Basic earnings per share
includes no dilution and is computed by dividing net income (loss) available to
common stockholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share reflects the potential dilution of
securities that could share in the earnings of an entity.

A reconciliation of the denominators of the basic and diluted income (loss)
per share computations for the years ended January 31, 1999, 1998 and 1997 is
presented below:

1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net income (loss) $ 6,667 $ (4,544) $ (6,311)
-------- -------- --------
-------- -------- --------
Shares Calculation:
Weighted average basic
shares outstanding 24,776 12,030 10,011
Effect of dilutive securities
Options 2,019 -- --
Warrants 85 -- --
-------- -------- --------
Total shares used to compute
diluted income (loss)
per share 26,880 12,030 10,011
-------- -------- --------
-------- -------- --------
Net income (loss) per share:
Basic $ 0.27 $ (0.38) $ (0.63)
-------- -------- --------
-------- -------- --------
Diluted $ 0.25 $ (0.38) $ (0.63)
-------- -------- --------
-------- -------- --------
</TABLE>

RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1998 the Financial Accounting Standards Board issued FASB No. 133,
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. This Statement
establishes accounting and reporting standards for derivative instruments and
for hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. If certain conditions are met, a derivative may
be specifically designated as (a) a hedge of the exposure to changes in the fair
value of a recognized asset or liability or an unrecognized firm commitment, (b)
a hedge of the exposure to variable cash flows of a forecasted transaction, or
(c) a hedge of the foreign currency exposure of a net investment in a foreign
operation, an unrecognized firm commitment, an available-for-sale security, or a
foreign-currency-denominated forecasted transaction. Changes in the fair value
of a derivative (that is, gains and losses) are accounted for within earnings or
as a component of other comprehensive income, depending on the intended use of
the derivative and the resulting designation. This Statement is effective for
all quarters of fiscal years beginning after June 15, 1999. Because the Company
does not currently utilize derivative instruments or hedges, the implementation
of this accounting standard will have no impact on the Company's results of
operations or financial condition.

41
<PAGE>

NOTE 3 FINANCIAL STATEMENT COMPONENTS

Computers, furniture and office equipment consists of the following:

JANUARY 31
---------------------
1999 1998
------- -------
<S> <C> <C>
Computer equipment ............ $ 8,835 $ 7,625
Furniture and office equipment 3,704 2,976
Less: Accumulated depreciation (8,428) (6,745)
------- -------
$ 4,111 $ 3,856
------- -------
------- -------
</TABLE>

Accrued expenses consist of the following:

JANUARY 31
------------------
1999 1998
------ ------
<S> <C> <C>
Accrued wages and benefits . $4,545 $2,675
Accrued merger-related costs 1,694 --
Income taxes payable ....... 1,466 465
Other accrued expenses ..... 2,047 1,038
------ ------
$9,752 $4,178
------ ------
------ ------
</TABLE>

See Note 11 for a discussion of the accrued merger-related costs.

NOTE 4 LINE OF CREDIT

The Company had a $2,000 working capital line of credit with a bank which
expired September 2, 1998. Borrowings were limited to the lesser of $2,000 or
70% of eligible accounts receivable. Borrowings bore interest at an annual rate
of 1.75% above the bank's prime rate (8.5% at January 31, 1998) and were
collateralized by all of the Company's assets. No amounts were outstanding under
the line as of January 31, 1998 or 1997. There were no borrowings in fiscal
1999. Maximum and average borrowings during fiscal 1998 were $1,715 and $298,
respectively. The line of credit agreement contained certain covenants
pertaining to operating results and certain other financial ratios. The Company
was in compliance with these covenants prior to the expiration of the agreement.

In April 1999, the Company successfully renegotiated its line of credit
which had expired in September 1998. The provisions of the new line of credit
agreement include maximum borrowings of $4,000, interest at the bank's prime
lending rate, and customary financial covenants.

42
<PAGE>

NOTE 5 LONG-TERM DEBT

Long-term debt consists of the following:

JANUARY 31
-----------------
1999 1998
----- -----
<S> <C> <C>
Capital lease obligations; bear interest at 8.0%
to 13.5% per annum; due in varying monthly
installments trough October 2001 ............ $ 233 $ 583
----- -----
233 583
Current portion-long term debt ................. (187) (349)
----- -----
$ 46 $ 234
----- -----
----- -----
</TABLE>

Future payments of long-term debt for years ending January 31 are as follows:

<TABLE>
<S> <C>
2000 ................................................................. $ 199
2001 ................................................................. 46
-----
245
Less: Amount representing interest ................................... (12)
-----
$ 233
-----
-----
</TABLE>

NOTE 6 OPERATING LEASES

The Company leases equipment and office space in several facilities under
non-cancelable operating leases which expire on various dates through March
2010. Rental expense under such leases was $2,656, $2,411 and $1,676 for the
years ended January 31, 1999, 1998 and 1997, respectively. Future minimum
payments under the lease agreements are as follows for years ending January 31:

<TABLE>
<S> <C>
2000 ............................................. $ 2,169
2001 ............................................. 1,875
2002 ............................................. 1,804
2003 ............................................. 1,421
2004.............................................. 1,196
Thereafter........................................ 1,494
-------
$9,959
-------
-------
</TABLE>

NOTE 7 INCOME TAXES

At January 31, 1999, the Company had federal net operating loss
carryforwards of approximately $15,800 for income tax purposes. The federal net
operating loss carryforwards will begin to expire in 2009. Utilization of these
net operating loss carryforwards in the future by the Company may be limited or
deferred subject to Section 382 of the Internal Revenue Code. Based upon
management's estimates, IA's initial public offering combined with the

43
<PAGE>

impact of the merger of IA and IQ resulted in a change of ownership which limits
the Company's utilization of the net operating loss carryforwards to $4,000 per
year.

During fiscal 1999, the Company reduced deferred tax valuation allowances
and recorded current and long-term deferred tax assets of $8,542. Deferred tax
assets arise primarily from net operating loss carryforwards and other timing
differences. Based on the successful completion of the merger with IQ and the
foundation created for current and future profitable operations, management
believes that it is more likely than not that the deferred tax asset will be
fully utilized by the Company. As of January 31, 1999, the Company has foreign
net operating loss carryforwards of approximately $2,700. No tax benefit has
been recognized for such foreign loss carryforwards as utilization of such
benefits is not presently deemed by management to be more likely than not based
on the weight of available evidence.

The benefit from income taxes in fiscal 1999 results from the reduction in
the valuation allowance discussed above. The provision for income taxes in
fiscal 1998 and 1997 results from the taxable income of IQ which cannot be
offset with the net operating losses of IA prior to the date of the merger.
Specifically, net income tax (benefit) expense consists of the following:

Years ended January 31,
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Current:
Federal $ 1,446 $ 525 $ 477
State 213 71 84
Foreign 246 99 274
------- ------- -------
1,905 695 835
Deferred (7,549) (189) (166)
------- ------- -------
Net provision for (benefit from)
income taxes $(5,644) $ 506 $ 669
------- ------- -------
------- ------- -------
</TABLE>

Deferred tax assets and liabilities reflect the tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for tax purposes. Significant components
of the Company's deferred tax liabilities and assets are as follows:

44
<PAGE>

JANUARY 31,
-----------------------
1999 1998
-------- --------
<S> <C> <C>

Deferred tax liabilities:
Capitalized software development costs ...... $ 136 $ 549
Purchased software development costs ........ 37 87
Prepaid expenses ............................ 137 255
Tax depreciation in excess of book .......... 122 --
Other ....................................... 69 58
-------- --------
Total deferred tax liabilities ........... 501 949

Deferred tax assets:
Net operating loss carryforwards ............ 6,782 8,113
Vacation and other accruals ................. 1,002 1,272
Book depreciation in excess of tax .......... -- 168
Research and development credit carryforwards 360 85
Purchased research and development costs .... 99 100
Accounts receivable allowance ............... 381 304
Other ....................................... 1 25
-------- --------
Total deferred tax assets ................ 8,625 10,067
-------- --------

Valuation allowance ........................... (1,082) (9,624)
-------- --------
Total net deferred income taxes .......... $ 7,042 $ (506)
-------- --------
-------- --------
</TABLE>

At January 31, 1999 and 1998, net current deferred tax assets (liabilities)
were $5,812 and $(22), respectively, and net non-current deferred tax assets
(liabilities) were $1,230 and $(484), respectively.

A reconciliation of the statutory U.S. federal income tax rate to the
effective tax rate per the statement of operations is as follows:

Years ended January 31,
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Federal tax (benefit) at statutory rates $ 348 $(1,373) $(1,918)
State income taxes, net of federal benefit 51 (385) (324)
Non-deductible foreign subsidiary losses 1,082 -- --
Non-deductible merger expenses 1,141 -- --
Change in deferred tax valuation allowance (8,542) 2,397 3,137
Foreign taxes 236 (184) (215)
Tax-free investment income (194) (164) (113)
Other 234 215 102
------- ------- -------
$(5,644) $ 506 $ 669
------- ------- -------
------- ------- -------
</TABLE>

45
<PAGE>

NOTE 8 COMMITMENTS AND CONTINGENCIES

On October 23, 1997, a complaint was served on IQ and certain of its
executive officers on behalf of purchasers of IQ Common Stock between May 8,
1996 and February 3, 1997 alleging violations of Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934. The claim alleges that IQ failed to disclose
the risks and liabilities assumed by IQ in connection with the transition of its
sales force from an inside telesales model to an outside field-based model. The
Company signed a Memorandum of Understanding with the plaintiffs to settle the
claim for $600, subject to certain conditions including court approval, and
recognized the related costs in fiscal 1999. The Company expects the matter to
be completely settled during the first half of fiscal 2000, and does not expect
the settlement to have a material adverse affect on its results of operations or
financial condition.

NOTE 9 CAPITAL STRUCTURE

In September 1997, the Board of Directors authorized the reincorporation of
the Company in Delaware, set the number of authorized shares of the Company at
60 million and designated a par value of $0.01 for common shares. In addition,
the Company has authorized 5 million $.01 par value preferred shares.

In September 1998, the Company completed a merger with IQ which was
accounted for as a pooling of interests. The merger was effected by issuing 1.96
shares of IA common stock for every share of IQ common stock outstanding as of
the date of the merger. All share amounts have been presented as though the
companies had merged as of the earliest period presented.

WARRANTS

In December 1997, the Company and certain holders of its outstanding
preferred stock (the "Lenders") entered into an agreement (the "Loan Agreement")
to provide the Company with a $3,000 revolving loan commitment. In conjunction
with the Loan Agreement, which expired unused 10 days following the closing of
the offering, the Company granted to the Lenders warrants to purchase a total of
30,000 shares of common stock at a purchase price of $5.00 per share. Such
warrants expire December 2002. Using the fair value method prescribed in SFAS
No. 123 "ACCOUNTING FOR STOCK-BASED COMPENSATION," the fair value of the
warrants was immaterial.

Immediately prior to the offering, the Company had outstanding 779,826
stock purchase warrants at conversion prices ranging from $1.50 to $5.00. Of
these, 606,407 warrants were automatically exercised and converted into 429,565
shares of common stock upon the closing of the offering.

NOTE 10 STOCK OPTION AND EMPLOYEE STOCK PURCHASE PLANS

STOCK OPTION PLANS

The Company has a stock incentive plan (the "1992 Stock Option Plan") that
reserves a total of 2,640,000 shares of common stock for issuance of stock
options to employees, officers and directors.

In September 1997, the Company's Board of Directors adopted the 1997 Equity
Incentive Plan (the "1997 Plan"). The number of shares of common stock reserved
for issuance under the 1997 Plan is equal to 1,107,871. Beginning February 1,
1999 and each year thereafter, the number of shares reserved for issuance will
automatically increase by the lesser of 400,000 shares or 3.5% of the total
number of shares of common stock then outstanding.

The option price for stock options granted is determined by the Company's
Board of Directors on the date of grant. Canceled options are available for
future grant and unvested options issued to employees are canceled when their
employment with the Company terminates. Generally, options granted to employees
vest over a five-year period and expire ten years after the date of grant.

At the time of the merger, IQ had outstanding a total of 659,275
options to acquire IQ common stock under

46
<PAGE>

three stock option plans. Upon consummation of the merger with IQ, each option
outstanding under IQ's stock option plans as of the merger date was converted to
options to acquire 1.96 shares of IA common stock. All stock option disclosures
have been presented in accordance with the foregoing as though the merger had
occurred as of the earliest period presented.

As of January 31, 1999, the Company had a total of 4,863,912 shares
reserved for issuance under all stock option plans. As of February 1, 1999, such
number increased automatically by 400,000 shares.

A summary of the stock option activity is as follows:

Weighted-
Exercise Price Average
Options Per Share Exercise Price
---------- -------------- --------------
<S> <C> <C> <C>
Outstanding at January 31, 1996 2,041,560 $0.34 - $11.90 $2.39
Granted ....................... 1,467,200 $1.13 - $12.12 $4.70
Exercised ..................... (379,154) $0.34 - $ 6.83 $3.29
Canceled ...................... (405,080) $0.88 - $ 9.33 $4.35

Outstanding at January 31, 1997 2,724,526 $0.82 - $12.12 $3.23
Granted ....................... 2,016,700 $1.13 - $ 5.84 $4.01
Exercised ..................... (271,551) $0.88 - $ 3.32 $1.44
Canceled ...................... (1,027,344) $1.13 - $11.93 $7.07
--------------

Outstanding at January 31, 1998 3,442,331 $0.82 - $12.12 $2.70
Granted ....................... 1,673,220 $3.76 - $ 8.50 $5.75
Exercised ..................... (155,431) $0.82 - $ 6.82 $1.93
Canceled ...................... (272,489) $1.13 - $ 7.81 $4.52
---------- -------------- --------------

Outstanding at January 31, 1999 4,687,631 $0.88 - $12.18 $3.72
---------- -------------- --------------
---------- -------------- --------------

</TABLE>

Stock options exercisable at January 31, 1999 and 1998 were 1,647,170 and
1,004,990, respectively. The weighted-average fair value of options granted
during fiscal 1999, 1998 and 1997 using the Black-Scholes option-pricing model
was $4.59, $2.08 and $2.99 per share, respectively.

The following table summarizes information about fixed-price stock options
outstanding at January 31, 1999:

Options Outstanding Options Exercisable
--------------------------------------------- ---------------------------------
Weighted-
Average Weighted- Weighted-
Remaining Average Average
Number Contractual Exercise Number Exercise
Range of Exercise Prices Outstanding Life Price exercisable Price
- ------------------------ ------------- ------------ ---------------- ----------------

<S> <C> <C> <C> <C> <C>
$0.875 - $1.625 1,733,352 6.0 $1.13 905,716 $1.13
$2.125 - $4.00 696,794 6.5 $3.43 312,079 $3.43
$4.125 - $5.836 1,365,465 7.5 $5.24 210,290 $5.26
$6.122 - $12.181 892,020 8.0 $6.66 219,085 $6.50
------------- -----------------
Totals 4,687,631 1,647,170
------------- -----------------
------------- -----------------
</TABLE>

47
<PAGE>

The Company records compensation related to stock options using the
intrinsic value method of APB No. 25, "ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES."

The Company has adopted the disclosure-only provisions of SFAS No. 123. For
purposes of the pro forma disclosures below, the estimated fair value of the
options is amortized to expense over the options' vesting period. Had
compensation cost for the Company's option stock plans been determined based on
the minimum value at the grant date for awards during fiscal 1999, 1998 and 1997
consistent with the provisions of SFAS No. 123, the Company's net income (loss)
and net income (loss) per share would have changed to the pro forma amounts
indicated below:

Years ended January 31,
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Net income (loss):
As reported $ 6,667 $ (4,544) $ (6,311)
--------- --------- ---------
--------- --------- ---------
Pro forma $ 3,802 $ (5,362) $ (6,976)
--------- --------- ---------
--------- --------- ---------
Basic income (loss) per share:
As reported $ 0.27 $ (0.38) $ (0.63)
--------- --------- ---------
--------- --------- ---------
Pro forma $ 0.15 $ (0.45) $ (0.70)
--------- --------- ---------
--------- --------- ---------
</TABLE>

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in fiscal 1999, 1998 and 1997, respectively;
dividend yield of 0%; risk-free interest rates of 5.0%, 6.2% and 6.4%;
volatility factors of the expected market price of the Company's common stock of
.97, .37, and .33, respectively, and expected lives of 6.0, 6.1 and 6.5 years
respectively.

EMPLOYEE STOCK PURCHASE PLAN

In September 1997, the Board of Directors adopted the Company's 1997
Employee Stock Purchase Plan (the "Purchase Plan"). Under the Purchase Plan,
eligible employees may purchase on each purchase date, as defined, shares of
common stock at 85% of its fair market value, up to the lesser of 1,000 shares
or 15% of the employee's compensation. The Company has reserved 550,000 shares
of common stock for issuance under the Purchase Plan.

NOTE 11 MERGER-RELATED EXPENSES

Merger-related expenses for fiscal 1999 relate to the Company's merger with
IQ which was completed in September 1998. In connection with the merger, the
Company incurred direct transaction and other related expenses of $6,500. Merger
related expenses consisted of approximately $3,250 of investment banking, legal
and professional fees; approximately $1,650 of costs to combine and reorganize
the operations of IA and IQ, principally related to lease terminations and
severance; approximately $700 of adjustments to write-off certain intangible
assets not utilized by the combined company; and approximately $900 of other
one-time merger related expenses.

The Company had recorded as of January 31, 1999, accrued merger-related
expenses of approximately $1,700, consisting primarily of costs to reorganize
the Company's operations. Substantially all changes to merger-related accruals
since the merger date were the result of payments of related expenses.

NOTE 12 BENEFIT PLAN

The Company offers its employees a 401(k) savings plan. Eligible employees
may elect to contribute a portion of their salaries up to limits defined by the
Internal Revenue Code. The Company may, at its sole discretion,

48
<PAGE>

provide profit sharing contributions. The Company matches up to 6% of employee
contributions. Expense related to Company matching contributions were $31, $32,
and $13 in fiscal 1999, 1998 and 1997 respectively. The Company also offers
employees of its subsidiaries in the United Kingdom and Germany a defined
contribution plan. The Company does not offer other post-retirement or
post-employment benefits.

NOTE 13 RELATED PARTY TRANSACTIONS

At January 31, 1999 and 1998, the Company has a receivable from an officer
in the amount of $86 and $80, respectively. The receivable bears interest at
5.3%, is secured by 12,700 shares of Company common stock and is due sixty days
after demand by the Company.

During fiscal 1999, the Company entered into a strategic partnership
agreement with a software development and marketing company. A member of the
Company's board of directors was an employee of the strategic partner during
calendar 1998. The three-year agreement provides for annual license fees to be
paid to the Company, in exchange for a license granting the right to the
strategic partner to embed the Company's products within the partner's software
products. Management believes that the terms of the agreement are representative
of terms which would be reached in an arm's length negotiation.

NOTE 14 SEGMENT INFORMATION AND GEOGRAPHIC AREAS

The Company operates in one industry segment, the development and marketing
of business analysis software products for Business Intelligence applications
and related services. Generally, product and service revenues result from sales
to external customers and are attributable to the Company's Business
Intelligence software products.

International operations include operations in the United Kingdom, France,
Australia, Holland, Canada, and Germany by the Company's wholly-owned
subsidiaries. The Company's subsidiaries sell the Company's software products
and services in foreign countries. The following table presents a summary of
operating information and certain balance sheet information by geographic
region:

FISCAL YEARS ENDED JANUARY 31
--------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Domestic operations ........... $ 57,183 $ 40,293 $ 28,430
United Kingdom operations ..... 10,357 9,377 7,607
Other international operations 3,150 625 388
-------- -------- --------

Consolidated ..................... $ 70,690 $ 50,295 $ 36,425
-------- -------- --------
-------- -------- --------

Income (loss) before income taxes:
Domestic operations ........... $ 3,369 $ (2,379) $ (5,420)
United Kingdom operations ..... (1,742) (889) (100)
Other international operations (604) (770) (122)
-------- -------- --------

Consolidated ..................... $ 1,023 $ (4,038) $ (5,642)
-------- -------- --------
-------- -------- --------

Identifiable assets:
Domestic operations ........... $ 62,856 $ 56,673 $ 29,529
United Kingdom operations ..... 6,761 2,378 1,684
Other international operations 1,590 195 --
-------- -------- --------

Consolidated ..................... $ 71,207 $ 59,246 $ 31,213
-------- -------- --------
-------- -------- --------

</TABLE>

49
<PAGE>

NOTE 15 NON-CASH TRANSACTIONS

During fiscal 1998 and 1997, the Company acquired $264 and $486,
respectively, of fixed assets through capital leases.

During fiscal 1998, 9,483,334 shares of preferred stock and 606,407 stock
purchase warrants were converted in cashless exercises to 9,912,899 shares of
common stock.

NOTE 16 SUBSEQUENT EVENTS

SHAREHOLDER RIGHTS PLAN

In February 1999, the Board of Directors declared a dividend of one
preferred share purchase right (a "Right") to purchase one one-hundredth of a
share of the Company's Series A Junior participating Preferred Stock, par value
$0.01 per share (the "Preferred Shares"), for each share of the Company's Common
Stock outstanding as of the close of business on March 15, 1999. Each Right will
entitle the registered holder to purchase from the Company, under certain
conditions, one one-hundredth of a Preferred Share at an initial price of
$60.00. The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to anyone attempting to acquire the Company in a hostile
takeover. The Rights should not interfere with any merger or other business
combination approved by the Board of Directors since the Board of Directors may,
at its option and in its sole discretion, redeem the Rights as provided in the
Rights Agreement.

OPERATING LEASE

In March 1999, the Company entered into an operating lease for an office
facility. The lease requires base rental payments of approximately $2,961 plus
operating expenses over its five-year term. These payments are in addition to
the amounts disclosed in Note 8 above.

ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.

PART III

ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information in response to this Item is incorporated by reference herein
from the sections entitled "Proposal No. 1 - Election of Directors" and
"Section 16(a) Benefical Ownership Reporting Compliance" within the Company's
1999 Proxy Statement.

ITEM 11 EXECUTIVE COMPENSATION

Information in response to this Item is incorporated by reference herein
from the section entitled "Executive Compensation" within the Company's 1999
Proxy Statement.

ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information in response to this Item is incorporated by reference herein
from the section entitled "Security Ownership of Certain Beneficial Owners and
Management" within the Company's 1999 Proxy Statement.

50
<PAGE>

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information in response to this Item is incorporated by reference herein
from the section entitled "Certain Relationships and Related Transactions"
within the Company's 1999 Proxy Statement.

PART IV

ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)(1) Financial Statements.

Reports of Independent Accountants
Consolidated Financial Statements
Balance Sheets
Statements of Operations
Statements of Stockholders' Equity
Statements of Cash Flows
Notes to Consolidated Financial Statements

(2) Financial Statement Schedules

Schedule have been omitted because the information required to be set
forth therein is not applicable or is readily available in the financial
statements or notes thereto.

(3) Exhibits.

2.1* Amended and Restated Agreement and Plan of
Merger dated as of June 29, 1998 among IQ
Software Corporation, the Registrant and IAC
Merger Corp. (included as Appendix A to the
Joint Proxy Statement/Prospectus included in
Part I of the Registration Statement on Form
S-4 filed on August 21, 1998).
3.1 Certificate of Incorporation, as amended and
restated
3.2** Bylaws, as amended.
4.1** Specimen Common Stock Certificate.
4.2** 1993 Stock Purchase Agreement
4.3*** Rights Agreement dated as of March 1, 1999,
between Information Advantage, Inc. and
Norwest Bank Minnesota, National
Association, as Rights Agent, which
includes, as exhibits, the Form of
Certificate of Designations of Rights,
Preferences and Privileges of Series A
Junior Participating Preferred Stock, the
Form of Right Certificate, and the
Form of Summary of Rights.
10.1** Form of Indemnification Agreement.
10.2** 1992 Stock Option Plan, as amended.
10.3** 1997 Equity Incentive Plan, as amended.
10.4**** 1997 Employee Stock Purchase Plan, as
amended.
10.5** Employment Agreement between the Company and
Larry J. Ford, dated April 19, 1995.
10.6** Amendment to the Employment Agreement
between the Company and Larry J. Ford, dated
May 23, 1995.
10.7** Amended and Restated Employment Agreement
between the company and Richard L. Tanler,
dated June 11, 1992
10.8** Promissory Note between the Company and
Richard Tanler, dated April 11, 1996.

51
<PAGE>

10.9** Employment Agreement between the Company and
Richard S. Parker, dated June 11, 1992.
10.10** Employment Agreement between the Company and
Rory C. (Butch) Terrien, dated June 11,
1992.
10.11** Offer Letter to Robin L. Pederson, dated
March 6, 1996.
10.12** Offer Letter to Donald W. Anderson, executed
November 4, 1996.
10.13** Amended and Restated Business Loan Agreement
between the Company and Silicon Valley Bank,
dated September 3, 1997.
10.14** Subordinated Loan and Security Agreement
between the Company and Comdisco, Inc.,
dated April 12, 1996.
10.15** Severance Agreement between the Company and
Larry J. Ford, dated November 10, 1997.
10.16** Form of Severance Agreement between the
Company and Richard L. Tanler, Robin L.
Pederson, Rory C. (Butch) Terrien, Donald W.
Anderson, Richard S. Parker, Mark Furtney,
Mary K. Trick, Keith Deane and Michael
Gaard, dated November 10, 1997.
10.17** Loan and Warrant Purchase Agreement between
the Company and certain holders of Preferred
Stock, dated December 4, 1997.
10.18* Employment Agreement between the Registrant
and Charles R. Chitty.
10.19* Form of Reseller Agreement between IA and
IQ, dated July 8, 1998.
10.20 Employment Agreement between the Company and
Kurt L. Betcher, dated January 8, 1999.
21.1** Subsidiaries of the Registrant.
23.1 Consent of Independent Accountants.
23.2 Consent of Ernst & Young, LLP, Independent
Auditors.
27.1 Financial Data Schedule.

- ---------------------
* Incorporated by reference to the Company's Registration Statement on
Form S-4 (File No. 333-62079) filed on August 21, 1998

** Incorporated by reference to the Company's Registration Statement on
Form S-1 (File No. 333-37707) filed on October 10, 1997.

*** Incorporated by Reference to the Company's Registration Statement on
Form 8-A (File No. 000-23475) filed on March 4, 1999.

**** Incorporated by reference to the Company's Definitive Schedule 14A (Proxy
Statement) filed on May 19, 1998.

(b) Reports on Form 8-K.

None.

52
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on April 28, 1999.

INFORMATION ADVANTAGE, INC.

By: /s/ Larry J. Ford
-----------------
Larry J. Ford
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

/s/ Larry J. Ford President, Chief Executive Officer April 28, 1999
- ----------------- and Director (Principal Executive
Larry J. Ford Officer)

/s/ Kurt L. Betcher Vice President, Chief Financial April 28, 1999
- ------------------- Officer (Principal Financial and
Kurt L. Betcher Accounting Officer)

/s/ Richard L. Tanler Chairman of the Board of Directors April 28, 1999
- --------------------- and Senior Vice President,
Richard L. Tanler Strategic Planning and Marketing

/s/ Ronald E. F. Codd Director April 28, 1999
- ---------------------
Ronald E. F. Codd

/s/ Promod Haque Director April 28, 1999
- ----------------
Promod Haque

/s/ Donald R. Hollis Director April 28, 1999
- --------------------
Donald R. Hollis

/s/ Jay H. Wein Director April 28, 1999
- ---------------
Jay H. Wein

/s/ William H. Younger, Jr. Director April 28, 1999
- --------------------------
William H. Younger, Jr.

53
<PAGE>

INDEX TO EXHIBITS

Exhibit
Number Description
- ---------- ---------------
2.1* Amended and Restated Agreement and Plan of Merger dated as of
June 29, 1998 among IQ Software Corporation, the Registrant and
IAC Merger Corp. (included as Appendix A to the Joint Proxy
Statement/Prospectus included in Part I of the Registration
Statement on Form S-4 filed on August 21, 1998).
3.1 Certificate of Incorporation, as amended and restated.
3.2** Bylaws, as amended.
4.1** Specimen Common Stock Certificate.
4.2** 1993 Stock Purchase Agreement.
4.3*** Rights Agreement dated as of March 1, 1999, between Information
Advantage, Inc. and Norwest Bank Minnesota, National
Association, as Rights Agent, which includes, as exhibits, the
Form of Certificate of Designations of Rights, Preferences and
Privileges of Series A Junior Participating Preferred Stock, the
Form of Right Certificate, and the Form of Summary of Rights.
10.1** Form of Indemnification Agreement.
10.2** 1992 Stock Option Plan, as amended.
10.3** 1997 Equity Incentive Plan, as amended.
10.4**** 1997 Employee Stock Purchase Plan, as amended.
10.5** Employment Agreement between the Company and Larry J. Ford,
dated April 19, 1995.
10.6** Amendment to the Employment Agreement between the Company and
Larry J. Ford, dated May 23, 1995.
10.7** Amended and Restated Employment Agreement between the company
and Richard L. Tanler, dated June 11, 1992.
10.8** Promissory Note between the Company and Richard Tanler, dated
April 11, 1996.
10.9** Employment Agreement between the Company and Richard S. Parker,
dated June 11, 1992.
10.10** Employment Agreement between the Company and Rory C. (Butch)
Terrien, dated June 11, 1992.
10.11** Offer Letter to Robin L. Pederson, dated March 6, 1996.
10.12** Offer Letter to Donald W. Anderson, executed November 4, 1996.
10.13** Amended and Restated Business Loan Agreement between the Company
and Silicon Valley Bank, dated September 3, 1997.
10.14** Subordinated Loan and Security Agreement between the Company and
Comdisco, Inc., dated April 12, 1996.
10.15** Severance Agreement between the Company and Larry J. Ford, dated
November 10, 1997.
10.16** Form of Severance Agreement between the Company and Richard L.
Tanler, Robin L. Pederson, Rory C. (Butch) Terrien, Donald W.
Anderson, Richard S. Parker, Mark Furtney, Mary K. Trick, Keith
Deane and Michael Gaard, dated November 10, 1997.
10.17** Loan and Warrant Purchase Agreement between the Company and
certain holders of Preferred Stock, dated December 4, 1997.
10.18* Employment Agreement between the Registrant and Charles R.
Chitty.
10.19* Form of Reseller Agreement between IA and IQ, dated
July 8, 1998.
10.20 Employment Agreement between the Company and Kurt L. Betcher,
dated January 8, 1999.
21.1** Subsidiaries of the Registrant.
23.1 Consent of Independent Accountants.
23.2 Consent of Ernst & Young, LLP, Independent Auditors.
27.1 Financial Data Schedule.

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

54
<PAGE>

* Incorporated by reference to the Company's Registration Statement on
Form S-4 (File No. 333-62079) filed on August 21, 1998
** Incorporated by reference to the Company's Registration Statement on
Form S-1 (File No. 333-37707) filed on October 10, 1997.
*** Incorporated by Reference to the Company's Registration Statement on
Form 8-A (File No. 000-23475) filed on March 4, 1999.
**** Incorporated by reference to the Company's Definitive Schedule 14A
(Proxy Statement) filed on May 19, 1998.

<PAGE>

EXHIBIT 3.1

SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
INFORMATION ADVANTAGE, INC.

The undersigned hereby certifies as follows:

1. The original Certificate of Incorporation of Information Advantage
Software, Inc., a Delaware corporation (the "Corporation"), was filed with
the Secretary of State of the State of Delaware on September 26, 1997.

2. The Amended and Restated Certificate of Incorporation of the Corporation
was filed with the Secretary of State of the State of Delaware on December
3, 1997.

3. The Second Amended and Restated Certificate of Incorporation of the
Corporation set forth below was adopted pursuant to Sections 242 and 245 of
the General Corporation Law of the State of Delaware and was authorized by
a written consent of majority of the Corporation's shareholders pursuant to
Section 228 of the General Corporation Law of the State of Delaware.

4. The Second Amended and Restated Certificate of Incorporation of the
Corporation reads in its entirety as follows:

ARTICLE 1

The name of the corporation is Information Advantage, Inc. (hereinafter
referred to as the "Corporation").

ARTICLE 2

The address of the Corporation's registered office in the State of Delaware
is The Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801,
County of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.

ARTICLE 3

The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware (hereinafter referred to as the "GCL").

ARTICLE 4

4.1 AUTHORIZED CAPITAL. The total number of shares of stock which the
Corporation shall have authority to issue is 65,000,000 shares, consisting of
60,000,000 shares of common stock, par value $0.01 per share (hereinafter
referred to as the "Common Stock"), and 5,000,000 shares of preferred stock, par
value $0.01 per share (hereinafter referred to as the "Preferred Stock"). The
powers, designations, preferences and relative, participating, optional or other
special rights (and the qualifications, limitations or restrictions thereof) of
the Common Stock and the Preferred Stock are as set forth in this Article 4.

4.2 COMMON STOCK. The Common Stock shall be subject to the express terms of
any series of Preferred Stock set forth in the Preferred Stock Designation (as
defined below in Section 4.5 of this Article 4) relating thereto. Each holder of
Common Stock shall have one vote in respect of each share of Common Stock held
by such holder of record on the books of the Corporation for the election of
directors and on all other matters on which stockholders of the Corporation are
entitled to vote. The holders of shares of Common Stock shall be entitled to
receive, when and if declared by the Board of Directors, out of the assets of
the Corporation which are by law available therefor, dividends payable either in
cash, in stock or otherwise.

1
<PAGE>

4.3 CUMULATIVE VOTING. No holder of shares of capital stock of the
Corporation shall have any cumulative voting rights.

4.4 PREEMPTIVE RIGHTS. No holder of shares of any class of capital stock of
the Corporation shall be entitled as such, as a matter of right, to subscribe
for, purchase or receive any part of any new or additional issue of stock of any
class whatsoever, or of securities convertible into or exchangeable for any
stock of any class whatsoever, whether now or hereafter authorized and whether
issued for cash or other consideration or by way of dividend.

4.5 PREFERRED STOCK. The Board of Directors of the Corporation (hereinafter
referred to as the "Board of Directors") is hereby expressly authorized at any
time following the closing of the Corporation's initial public offering pursuant
to an effective registration statement under the Securities Act of 1933, as
amended, covering the offer and sale of Common Stock of this Corporation (the
"Initial Public Offering"), and from time to time thereafter, to create and
provide for the issuance of shares of Preferred Stock in one or more series and,
by filing a certificate pursuant to the GCL (hereinafter referred to as a
"Preferred Stock Designation"), to establish the number of shares to be included
in each such series, and to fix the designations, preferences and relative,
participating, optional or other special rights of the shares of each such
series and the qualifications, limitations or restrictions thereof, as shall be
stated and expressed in the resolution or resolutions providing for the issue
thereof adopted by the Board of Directors, including, but not limited to, the
following:

(A) the designation of and the number of shares constituting such series,
which number the Board of Directors may thereafter (except as otherwise provided
in the Preferred Stock Designation) increase or decrease (but not below the
number of shares of such series then outstanding or reserved for issuance);

(B) the dividend rate for the payment of dividends on such series, if any,
the conditions and dates upon which such dividends shall be payable, the
preference or relation which such dividends, if any, shall bear to the dividends
payable on any other class or classes of or any other series of capital stock,
the conditions and dates upon which such dividends, if any, shall be payable,
and whether such dividends, if any, shall be cumulative or non-cumulative;

(C) whether the shares of such series shall be subject to redemption by the
Corporation, and, if made subject to such redemption, the times, prices and
other terms and conditions of such redemption;

(D) the terms and amount of any sinking fund provided for the purchase or
redemption of the shares of such series;

(E) whether or not the shares of such series shall be convertible into or
exchangeable for shares of any other class or classes of, any other series of
any class or classes of capital stock of, or any other security of, the
Corporation or any other corporation, and, if provision be made for such
conversion or exchange, the times, prices, rates, adjustments and any other
terms and conditions of the such conversion or exchange;

(F) the extent, if any, to which the holders of the shares of such series
shall be entitled to vote as a class or otherwise with respect to the election
of directors or otherwise;

(G) the restrictions, if any, on the issue or reissue of shares of the same
series or of any other class or series;

(H) the amounts payable on and the preferences, if any, of the shares of
such series in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation; and

(I) any other relative rights, preferences and limitations of that series.

ARTICLE 5

The Board of Directors is hereby authorized, at any time following the
first public offering of the Common Stock of the Corporation under the
Securities Act of 1933, as amended (the "Initial Public Offering"), and from
time to

2
<PAGE>

time thereafter, to create and issue, whether or not in connection with the
issuance and sale of any of its stock or other securities or property, rights
entitling the holders thereof to purchase from the Corporation shares of stock
or other securities of the Corporation or any other corporation, recognizing
that, under certain circumstances, the creation and issuance of such rights
could have the effect of discouraging third parties from seeking, or impairing
their ability to seek, to acquire a significant portion of the outstanding
securities of the Corporation, to engage in any transaction which might result
in a change of control of the Corporation or to enter into any agreement,
arrangement or understanding with another party to accomplish the foregoing or
for the purpose of acquiring, holding, voting or disposing of any securities of
the Corporation. The times at which and the terms upon which such rights are to
be issued will be determined by the Board of Directors and set forth in the
contracts or instruments that evidence such rights. The authority of the Board
of Directors with respect to such rights shall include, but not be limited to,
determination of the following:

(A) the initial purchase price per share or other unit of the stock or
other securities or property to be purchased upon exercise of such rights;

(B) provisions relating to the times at which and the circumstances under
which such rights may be exercised or sold or otherwise transferred, either
together with or separately from, any other stock or other securities of the
Corporation;

(C) provisions which adjust the number or exercise price of such rights or
amount or nature of the stock or other securities or property receivable upon
exercise of such rights in the event of a combination, split or recapitalization
of any stock of the Corporation, a change in ownership of the Corporation's
stock or other securities or a reorganization, merger, consolidation, sale of
assets or other occurrence relating to the Corporation or any stock of the
Corporation, and provisions restricting the ability of the Corporation to enter
into any such transaction absent an assumption by the other party or parties
thereto of the obligations of the Corporation under such rights;

(D) provisions which deny the holder of a specified percentage of the
outstanding stock or other securities of the Corporation the right to exercise
such rights and/or cause the rights held by such holder to become void;

(E) provisions which permit the Corporation to redeem or exchange such
rights, which redemption or exchange may be within the sole discretion of the
Board of Directors, if the Board of Directors reserves such right to itself; and

(F) the appointment of a rights agent with respect to such rights.

Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, following the Initial Public Offering, the
affirmative vote of at least 80 percent of the voting power of the then
outstanding Voting Stock (as defined below), voting together as a single class,
shall be required to amend, repeal or adopt any provision inconsistent with this
Article 5. For the purposes of this Certificate of Incorporation, "Voting Stock"
shall mean the outstanding shares of capital stock of the Corporation entitled
to vote generally in the election of directors.

ARTICLE 6

6.1 ADOPTION, AMENDMENT OR REPEAL OF BYLAWS; RIGHT OF INSPECTION. In
furtherance, and not in limitation, of the powers conferred by law, the Board of
Directors is expressly authorized and empowered:

(A) to adopt, amend or repeal the Bylaws of the Corporation, PROVIDED,
HOWEVER, that any Bylaws adopted by the Board of Directors under the powers
hereby conferred may be amended or repealed by the Board of Directors or by the
stockholders having voting power with respect thereto; and

(B) from time to time to determine whether and to what extent, and at what
times and places, and under what conditions and regulations, the accounts and
books of the Corporation, or any of them, shall be open to inspection of
stockholders; and, except as so determined, or as expressly provided in the
Purchase Agreements, this Certificate of Incorporation or in any Preferred Stock
Designation, no stockholder shall have any right to inspect any account, book or
document of the Corporation other than such rights as may be conferred by law.

3
<PAGE>

6.2 ADDITIONAL POWERS. The Corporation may in its Bylaws confer powers upon
the Board of Directors in addition to the foregoing and in addition to the
powers and authorities expressly conferred upon the Board of Directors by law.

6.3 AMENDMENT OF BYLAWS AND THIS ARTICLE 6. Notwithstanding anything
contained in this Certificate of Incorporation to the contrary, following the
Initial Public Offering, the affirmative vote of the holders of at least 80
percent of the voting power of the then outstanding Voting Stock, voting
together as a single class, shall be required to amend, repeal or adopt any
provision inconsistent with (i) this Article 6 or (ii) Section 2.2, 2.4, 2.5,
2.7 or 2.10 of Article II, Section 3.2, 3.3 or 3.5 of Article III or Article IX
of the Bylaws of the Corporation.

ARTICLE 7

7.1 NO ACTION BY WRITTEN CONSENT. Following the Initial Public Offering,
any action required or permitted to be taken by the stockholders of the
Corporation must be effected at a duly called annual or special meeting of
stockholders of the Corporation and may not be effected by any consent in
writing in lieu of a meeting of such stockholders.

7.2 SPECIAL MEETINGS. A special meeting of the holders of stock of the
Corporation entitled to vote on any business to be considered at any such
meeting may be called only by the Chairman of the Board of the Corporation, and
shall be called by the Secretary of the Corporation at the request of the Board
of Directors pursuant to a resolution adopted by a majority of the total number
of directors which the Corporation would at the time have if there were no
vacancies (the "Whole Board").

7.3 AMENDMENT OF THIS ARTICLE 7. Notwithstanding anything contained in this
Certificate of Incorporation to the contrary, following the Initial Public
Offering, the affirmative vote of at least 80 percent of the voting power of the
then outstanding Voting Stock, voting together as a single class, shall be
required to amend, repeal or adopt any provision inconsistent with this Article
7.

ARTICLE 8

8.1 NUMBER OF DIRECTORS. The number of directors of the Corporation shall
be fixed, and may be increased or decreased from time to time, in such a manner
as may be prescribed by the Bylaws of the Corporation.

8.2 ELECTION BY WRITTEN BALLOT NOT REQUIRED. Unless and except to the
extent that the Bylaws of the Corporation shall so require, the election of
directors of the Corporation need not be by written ballot.

8.3 STAGGERED BOARD. Following the Initial Public Offering, the directors
shall be divided into three classes, as nearly equal in number as reasonably
possible, and designated as Class I, Class II and Class III. Class I directors
shall be initially elected for a term expiring at the first annual meeting of
stockholders following the Initial Public Offering, Class II directors shall be
initially elected for a term expiring at the second annual meeting of
stockholders following the Initial Public Offering, and Class III directors
shall be initially elected for a term expiring at the third annual meeting of
stockholders following the Initial Public Offering. Members of each class shall
hold office until their successors are elected and qualified. At each succeeding
annual meeting of the stockholders of the Corporation, the successors of the
class of directors whose term expires at that meeting shall be elected to hold
office for a term expiring at the annual meeting of stockholders held in the
third year following the year of their election, and until their successors are
elected and qualified.

8.4 REMOVAL OF DIRECTORS. Following the Initial Public Offering, any
director may be removed from office at any time, but only for cause.

8.5 ADVANCE NOTICE. Advance notice of stockholder nominations for the
election of directors shall be given in the manner provided in the Bylaws of the
Corporation.

4
<PAGE>

8.6 VACANCIES. Following the Initial Public Offering, vacancies in the
Board of Directors resulting from death, resignation, retirement,
disqualification, removal from office or other cause, and newly created
directorships resulting from any increase in the authorized number of directors,
may be filled only by the affirmative vote of a majority of the remaining
directors, though less than a quorum of the Board of Directors, and directors so
chosen shall hold office for a term expiring at the annual meeting of
stockholders at which the term of office of the class to which they have been
elected expires and until such director's successor shall have been duly elected
and qualified. No decrease in the number of authorized directors constituting
the Whole Board shall shorten the term of any incumbent director.

8.7 AMENDMENT OF THIS ARTICLE 8. Notwithstanding anything contained in this
Certificate of Incorporation to the contrary, following the Initial Public
Offering, the affirmative vote of the holders of at least 80 percent of the
voting power of the then outstanding Voting Stock, voting together as a single
class, shall be required to amend, repeal or adopt any provisions inconsistent
with this Article 8.

ARTICLE 9

A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the GCL or (iv) for any transaction
from which the director derived an improper personal benefit.

If the GCL is amended after the filing of this Certificate of Incorporation
with the Secretary of State of the State of Delaware to authorize corporation
action further eliminating or limiting the personal liability of directors, then
the liability of a director of the Corporation shall be eliminated or limited to
the fullest extent permitted by the GCL.

No amendment or repeal of this Article 9 shall adversely affect any right
or protection of a director of the Corporation existing hereunder in respect of
any act or omission occurring prior to such amendment or repeal.

ARTICLE 10

Except as may be expressly provided in this Certificate of Incorporation,
the Corporation reserves the right at any time and from time to time to amend,
alter, change or repeal any provision contained in this Certificate of
Incorporation or a Preferred Stock Designation, and any other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted, in the manner now or hereafter prescribed herein or by law,
and all powers, preferences and rights of whatsoever nature conferred upon
stockholders, directors or any other persons whomsoever by and pursuant to this
Certificate of Incorporation in its present form or as hereafter amended are
granted subject to the right reserved in this Article 10, PROVIDED, HOWEVER,
that no Preferred Stock Designation shall be amended after the issuance of any
shares of the series of Preferred Stock created thereby, except in accordance
with the terms of such Preferred Stock Designation and the requirements of law.

ARTICLE 11

The name and mailing address of the incorporator is Brian Wenger, 2400 IDS
Center, Minneapolis, Minnesota 55402.

WITNESS my signature this 16th day of December, 1997.

/s/ Brian Wenger
---------------------------------
Brian Wenger, Secretary

5
<PAGE>

CERTIFICATE OF DESIGNATIONS
of
RIGHTS, PREFERENCES AND PRIVILEGES
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
INFORMATION ADVANTAGE, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)

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

Information Advantage, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (hereinafter called the
"Corporation"), hereby certifies that the following resolution was adopted by
the Board of Directors of the Corporation as required by Section 151 of the
General Corporation Law at a meeting duly called and held on February 25, 1999:

RESOLVED, that pursuant to the authority granted to and vested in the Board
of Directors of this Corporation (hereinafter called the "Board of Directors" or
the "Board") in accordance with the provisions of the Certificate of
Incorporation of the Corporation, the Board of Directors hereby creates a series
of Preferred Stock, par value $0.01 per share (the "Preferred Stock"), of the
Corporation and hereby states the designation and number of shares, and fixes
the relative rights, preferences, and limitations thereof as follows:

Series A Junior Participating Preferred Stock:

Section 1. Assignation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock." The Series A
Junior Participating Preferred Stock shall have a par value of $0.01 per share
and the number of shares constituting such series shall be 500,000.

Section 2. Proportional Adjustment. In the event the Corporation shall at
any time after the issuance of any share or shares of Series A Junior
Participating Preferred Stock (i) declare any dividend on the Common Stock of
the Corporation ("Common Stock") payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then and in each such case the
Corporation shall simultaneously effect a proportional adjustment to the number
of outstanding shares of Series A Junior Participating Preference Stock.

Section 3. Dividends and Distributions.

(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series A Junior Participating Preferred Stock with respect to dividends, the
holders of shares of Series A Junior Participating Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable in cash on
the last day of January, April, July and October in each year (each such date
being referred to herein as a "Quarterly Dividend Payment Date"), commencing on
the first Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Junior Participating Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to 100 times the aggregate
per share amount of all cash dividends, and 100 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions other
than a dividend payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise), declared
on the Common Stock since the immediately preceding Quarterly Dividend Payment
Date, or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of Series A Junior
Participating Preferred Stock.

(B) The Corporation shall declare a dividend or distribution on the
Series A Junior

6
<PAGE>

Participating Preferred Stock as provided in Section 3(A) above immediately
after it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock).

(C) Dividends shall begin to accrue on outstanding shares of Series A
Junior Participating Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares of Series A Junior Participating
Preferred Stock, unless the date of issue of such shares is prior to the record
date for the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a date after
the record date for the determination of holders of shares of Series A Junior
Participating Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
shares of Series A Junior Participating Preferred Stock in an amount less than
the total amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series A Junior Participating
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 30 days prior to the
date fixed for the payment thereof.

Section 4. Voting Rights. The holders of shares of Series A Junior
Participating Preferred Stock shall have the following voting rights:

(A) Each share of Series A Junior Participating Preferred Stock shall
entitle the holder thereof to 100 votes on all matters submitted to a vote of
the stockholders of the Corporation.

(B) Except as otherwise provided herein or by law, the holders of
shares of Series A Junior Participating Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters submitted
to a vote of stockholders of the Corporation.

(C) Except as required by law, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.

Section 5. Certain Restrictions.

(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating Preferred Stock as provided in
Section 3 are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Series A Junior
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:

(i) declare or pay dividends on, make any other distributions on,
or redeem or purchase or otherwise acquire for consideration any shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock;

(ii) declare or pay dividends on or make any other distributions
on any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior Participating
Preferred Stock, except dividends paid ratably on the Series A Junior
Participating Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the holders of
all such shares are then entitled; or

(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior Participating
Preferred Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such parity stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Junior Participating
Preferred Stock.

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(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under Section 5(A) above, purchase or
otherwise acquire such shares at such time and in such manner.

Section 6. Reacquired Shares. Any shares of Series A Junior Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein and in the Certificate of Incorporation, as then amended.

Section 7. Liquidation, Dissolution or Winding Up.

(A) Upon any liquidation, dissolution or winding up of the
Corporation, the holders of shares of Series A Junior Participating Preferred
Stock shall be entitled to receive an aggregate amount per share equal to 100
times the aggregate amount to be distributed per share to holders of shares of
Common Stock plus an amount equal to any accrued and unpaid dividends on such
shares of Series A Junior Participating Preferred Stock.

(B) If the assets of the Corporation legally available for
distribution to the holders of shares of Series A Junior Participating Preferred
Stock upon liquidation, dissolution or winding up of the Corporation are
insufficient to pay the full preferential amount set forth in Section 7(A)
above, then the entire assets of the Corporation legally available for
distribution to the holders of Series A Junior Participating Preferred Stock
shall be distributed among such holders in proportion to the shares of Series A
Junior Participating Preferred Stock then held by them.

(C) The foregoing rights upon liquidation, dissolution or winding up
provided to the holders of Series A Junior Participating Preferred Stock shall
be subject to rights of the holders of any other series of Preferred Stock
ranking prior and superior to the Series A Junior Participating Preferred Stock
upon liquidation, dissolution or winding up.

Section 8. Consolidation, Merger, etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or other property, then in any such case the shares of
Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed into an amount per share equal to 100 times the
aggregate amount of stock, securities, cash and/or any other property (payable
in kind), as the case may be, into which or for which each share of Common Stock
is changed or exchanged.

Section 9. No Redemption. The shares of Series A Junior Participating
Preferred Stock shall not be redeemable.

Section 10. Ranking. The shares of Series A Junior Participating Preferred
Stock shall rank junior to all other series of the Corporation's Preferred Stock
as to the payment of dividends and the distribution of assets, unless the terms
of any such series shall provide otherwise.

Section 11. Fractional Shares. Series A Junior Participating Preferred
Stock may be issued in fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series A Junior Participating Preferred Stock.

IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf
of the Corporation by its Chief Executive Officer and attested by its Secretary
this 25th day of February, 1999.

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INFORMATION ADVANTAGE, INC.

By /s/ Larry J. Ford
-------------------------------------
Larry J. Ford
Chief Executive Officer

ATTEST:

By: /s/ Brian D. Wenger
------------------------------
Brian D. Wenger
Secretary

<PAGE>

EXHIBIT 10.20

INFORMATION ADVANTAGE, INC.
EMPLOYMENT AGREEMENT
WITH KURT BETCHER

THIS AGREEMENT is entered into effective as of the 8th day of January,
1999, by and between INFORMATION ADVANTAGE, INC., a Delaware corporation (the
"Company"), and KURT BETCHER, a Minnesota resident ("Executive").

WHEREAS, the Company desires to engage Executive in the position of Vice
President and Chief Financial Officer;

WHEREAS, Executive desires to be employed by the Company as its Vice
President and Chief Financial Officer and to be assured of reasonable tenure and
terms and conditions of employment with the Company; and

WHEREAS, both parties recognize the critical importance to the Company, its
employees and investors, of preserving the confidentiality of the Company's
trade secrets and confidential information and of protecting the Company against
competition from former executives or other key employees of the Company
following their separation from the Company;

NOW, THEREFORE, in consideration of the foregoing premises and the parties'
mutual covenants and undertakings contained in this Agreement, the sufficiency
of which is hereby acknowledged, the Company and Executive agree as follows:

1. EMPLOYMENT AND TERM. Subject to the terms and conditions herein provided, the
Company hereby hires Executive, and Executive hereby accepts employment by the
Company for a term commencing as of the date hereof and continuing for a minimum
of one (1) year thereafter. The employment term shall automatically extend for
an additional one (1) year following the expiration of each employment year
(February 1 through January 31 of each year) unless, on or before January 1 of
each year, one party has notified the other party in writing that this Agreement
will not be extended for an additional year. In the event of such a
notification, the employment term of Executive will expire at the expiration of
the initial one (1) year employment term, or any extended term hereunder as the
case may be, without further obligation for either party, except as described
elsewhere in this Agreement or in any stock option agreements then in effect
between the Company and Executive. In addition, the Company may terminate the
employment of Executive upon thirty (30) days notice, without cause, provided
the Company pays Executive severance pay as described in paragraph 3.c of this
Agreement.

Notwithstanding the foregoing, the Company may terminate Executive's
employment for cause without notice and without further obligation of any kind
to Executive. For purposes of this Agreement, "cause" shall have the meaning set
forth in the Severance Agreement attached hereto as Exhibit A.

If the Executive voluntarily resigns for Good Reason the Company shall pay
Executive severance pay as described in paragraph 3.c of this Agreement. For
purposes of this Agreement, "Good Reason" shall have the meaning set forth in
the Severance Agreement attached hereto as Exhibit A.

It is further agreed that the term of Executive's employment under this
Agreement shall automatically terminate in the event of Executive's death. In
the event Executive becomes mentally or physically disabled during the term of
employment hereunder, his employment under this Agreement shall terminate as of
the date such disability is established. As used in this subparagraph, the term
"disabled" means suffering from any mental or physical condition, other than the
illegal use of drugs, which renders Executive unable to perform substantially
all of Executive's duties and services under this Agreement in a satisfactory
manner (an "impaired condition") for a period of ninety (90) consecutive days.
The date that Executive's disability is established shall be the ninety-first
(91st) day upon which such impaired condition exists. Upon termination for
disability, Executive shall not be entitled to receive severance pay, but shall
be entitled to receive continuation of his base salary (as herein defined) for a
period

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of one hundred eighty (180) days after the date of such termination, payable in
periodic installments in accordance with the standard payroll practices of the
Company in effect from time to time. If the Company maintains a disability
policy covering Executive, then the amount of payments to be made by the Company
to Executive pursuant to this provision shall be reduced by any amounts to be
paid to Executive under any such insurance policy during such one hundred eighty
(180) day period.

2. DUTIES AND REPRESENTATIONS OF EXECUTIVE. During Executive's employment
hereunder, he shall serve as the Company's Vice President and Chief Financial
Officer and will have the day-to-day responsibility for making decisions
relating to all aspects of the Company's financial, administrative, human
resource and internal operational systems, and shall have authority to and shall
perform such functions and exercise such powers and duties as are customary for
such position, subject always to the control of the Company's Board of Directors
and its President and Chief Executive Officer. Executive shall devote his full
time, attention, knowledge and skill exclusively to the loyal service of the
Company and shall perform all duties reasonably assigned to him by said Board of
Directors. Additionally, Executive shall do such traveling as may reasonably be
required by the Company in connection with the performance of his duties and
responsibilities. Executive represents and warrants to the Company that (a) his
acceptance of employment under this Agreement and his performance of the duties
contemplated herein are not in conflict with any obligation, undertaking or
agreement between Executive and any third party including, without limitation,
any of Executive's former employers, and (b) he has not and will not, during the
course of his employment with the Company, disclose or utilize without
permission any confidential or proprietary information, trade secrets,
materials, documents, or property owned by any third party including, without
limitation, any of Executive's former employers.

3. COMPENSATION. The Company shall pay to Executive the following compensation:

a. BASE SALARY. The Company shall pay to Executive an annual base
salary of One Hundred Eighty Thousand Dollars ($180,000), payable in
periodic installments in accordance with the standard payroll
practices of the Company in effect from time to time. Executive's base
salary shall be reviewed for potential adjustment on the basis of
performance from time to time.

b. BONUSES. Bonuses shall be paid to Executive as the Board of
Directors, President and the Chief Executive Officer of the Company
may determine in their discretion from time to time pursuant to the
Company's then-existing executive compensation practices. Executive's
variable on-target earnings (salary and bonuses) shall be $240,000 for
fiscal year 2000, based on achievement of objectives and revenue goals
agreed upon from time to time by the Company and Executive. Executive
shall be entitled to receive a $5,000 bonus each quarter the Company
meets its quarterly revenue and earnings targets. Executive shall be
entitled to receive an additional $5,000 bonus each quarter Executive
achieves management business objectives agreed upon from time to time
based on quarterly review by the Company and Executive. Executive
shall be entitled to receive a $20,000 bonus at year end each year the
Company meets its annual revenue and earnings targets. Such bonus
shall be paid in accordance with the standard payroll practices of the
Company in effect from time to time. Executive's bonuses shall be
reviewed for potential adjustment on the basis of performance from
time to time.

c. SEVERANCE PAY. In the event the Company gives notice to the
Executive that this Agreement will not be extended or upon termination
of the Executive's employment by the Company, other than for cause as
defined in paragraph 1, the Executive shall be entitled to receive his
then current base salary for an additional six (6) months following
the date of termination, to be paid as though the Executive had
remained in the employ of the Company. In addition, Executive and the
Company shall enter into the Severance Agreement attached hereto as
Exhibit A, to be effective as of the date hereof. The first sentence
of this subparagraph 3c.shall not apply to the extent that Executive
is entitled to severance payments under the Severance Agreement.
Except for bonuses earned by Executive under subparagraph 3.b hereof
for quarters or years, as applicable, in which Executive was employed
for the entire quarter or year, as applicable, and stock options
Executive is entitled to pursuant to the Severance Agreement and Stock
Option

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Agreement (referenced in subparagraph 3d.), the severance pay
described in this subparagraph 3c shall be in lieu of any other
compensation of any kind otherwise payable to Executive under this
Agreement after termination.

d. STOCK OPTION PLAN. Executive and the Company shall enter into a
Stock Option Agreement pursuant to the Company's 1997 Equity Incentive
Plan, to be dated effective January 8, 1999, whereby Executive is
granted 130,000 stock options to purchase shares of the Company's
common stock, which Agreement is attached hereto as Exhibit B.

4. ADDITIONAL BENEFITS. Executive shall be entitled to those additional Company
benefits and perquisites which may be customarily made available to other
executive employees of the Company. Without limiting the foregoing, Executive
shall be eligible to participate in any pension plan, or group life, health or
accident insurance, or any such other plan or policy which may presently be in
effect or which may hereafter be adopted by the Company for the benefit of its
executive employees and corporate officers generally. Furthermore, Executive
shall be entitled to the following additional benefits:

a) EXPENSE REIMBURSEMENT. During the term of Executive's employment
under this Agreement, the Company shall bear reasonable and ordinary
business expenses incurred by Executive in performing his duties,
including travel and living expenses while away from home on business
in the service of the Company, and long distance home telephone
expenses, provided that Executive accounts promptly for such expenses
to the Company in the manner reasonably prescribed from time to time
by the Company.

b) VACATION. During the term of Executive's employment under this
Agreement, Executive shall be entitled to take up to three (3) weeks
of vacation per year with pay, at such times as shall be mutually
convenient to the Company and Executive. Vacation time must be used
within the applicable employment year and may not be accumulated.

5. NONCOMPETITION, CONFIDENTIALITY AND INVENTIONS. Executive and the Company
shall enter into the Noncompetition, Confidentiality and Inventions Agreement
attached hereto as Exhibit C, to be effective as of the date hereof.

6. ASSIGNMENT. The rights and obligations of the Company under this Agreement
shall inure to the benefit of and shall be binding upon the successors and
assigns of the Company. The term "successor" includes any successor (whether
direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's business
and/or assets.

The Executive may not assign this Agreement nor any rights hereunder. Any
purported or attempted assignment or transfer by Executive of this Agreement or
any of Executive's duties, responsibilities or obligations hereunder shall be
void.

7. NOTICES. All notices, requests, demands and other communications under this
Agreement shall be in writing, shall be deemed to have been duly given on the
date of service if personally served on the parties to whom notice is to be
given, or on the second day after mailing if mailed to the parties to whom
notice is given, by first class mail, postage prepaid, and properly addressed as
follows:

If to the Company, at:

INFORMATION ADVANTAGE, INC.
Attn: Larry J. Ford
7905 Golden Triangle Drive
Suite 190
Eden Prairie, MN 55344

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If to Executive, at:

KURT BETCHER
1418 Appaloosa Trail
Eagan, MN 55122

Any party may change the address for the purpose of this paragraph by
giving the other written notice of the new address in the manner set forth
above.

8. CONSTRUCTION AND SEVERABILITY. The validity, interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of
Minnesota. In the event any provision of this Agreement shall be held illegal or
invalid for any reason, said illegality or invalidity shall not in any way
affect the legality or validity of any other provision hereof, it is the
intention of the parties hereto that the Company be given the broadest possible
protection respecting its confidential information and trade secrets and
respecting competition by Executive following his separation from the Company.

9. ARBITRATION. Any claims or disputes of any nature between the parties arising
from or related to the performance, breach, termination, expiration, application
or meaning of this Agreement shall be resolved exclusively by arbitration before
the American Arbitration Association in Minneapolis, Minnesota, pursuant to the
Association's rules for commercial arbitration.

The decision of the arbitrator(s) shall be final and binding upon both parties.
Judgment on the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof. In the event of submission of any dispute to
arbitration, each party shall, not later than thirty (30) days prior to the date
set for hearing, provide to the other party and to the arbitrator(s) a copy of
all exhibits upon which the party intends to rely at the hearing and a list of
all persons whom each party intends to call as witnesses at the hearing.

This paragraph 9 shall have no application to claims by the Company asserting
violations of or seeking to enforce, by injunction or otherwise, the terms of
the Noncompetition, Confidentiality and Inventions Agreement attached hereto as
Exhibit C. Such claims may be maintained by the Company in a lawsuit subject to
the terms of paragraph 10 below.

10. VENUE. Any action at law, suit in equity or judicial proceeding arising
directly, indirectly or otherwise in connection with, out of, related to or from
this Agreement or any provision hereof shall be litigated only in the courts of
the State of Minnesota, County of Hennepin. Executive waives any right Executive
may have to transfer or change the venue of any litigation brought against
Executive by the Company.

11. ENTIRE AGREEMENT. This Agreement and the Exhibits hereto set forth the
entire agreement between the Company and Executive with respect to his
employment by the Company and there are no undertakings, covenants or
commitments other than as set forth herein. This Agreement and the Exhibits
hereto may not be altered or amended, except by a writing executed by the party
against whom such alteration or amendment is to be enforced. This Agreement and
the Exhibits supersedes any and all prior understandings or agreements between
the parties.

12. COUNTERPARTS. This Agreement may be simultaneously executed in any number of
counterparts, and such counterparts executed and delivered, each as an original,
shall constitute but one in the same instrument.

13. CAPTIONS AND HEADINGS. The captions and paragraph headings used in this
Agreement are for convenience of reference only, and shall not affect the
construction or interpretation of this Agreement or any of the provisions
hereof.

14. SURVIVAL. The parties expressly acknowledge and agree that the provisions of
this Agreement which by their express or implied terms extend beyond the
expiration of this Agreement or the termination of Executive's employment
hereunder, shall continue in full force and effect, notwithstanding Executive's
termination of employment hereunder or the expiration of this Agreement.

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<PAGE>

15. WAIVERS. No failure on the part of either party to exercise, and no delay in
exercising, any right or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right or remedy hereunder preclude
any other or further exercise thereof or the exercise of any other right or
remedy granted hereby or by any related document or by law.

16. RELIANCE BY THIRD PARTIES. This Agreement is intended for the sole and
exclusive benefit of the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and permitted assigns, and
no other person or entity shall have any right to rely on this Agreement or to
claim or derive any benefit therefrom absent the express written consent of the
party to be charged with such reliance or benefit.

IN WITNESS WHEREOF, the Company has caused this instrument to be executed
and Executive has hereunto set his name as of the day and year first above
written.

EXECUTIVE: COMPANY:

INFORMATION ADVANTAGE, INC.

/s/ Kurt Betcher By: /s/ Larry J. Ford
- -------------------------------- -----------------------------------------
Kurt Betcher Larry J. Ford
Its: President and Chief Executive Officer

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<PAGE>

EXHIBIT A

INFORMATION ADVANTAGE, INC.
SEVERANCE AGREEMENT

THIS AGREEMENT is entered into as of January 8, 1999, by and between Kurt
Betcher (the "Executive"), and INFORMATION ADVANTAGE, INC., a Delaware
corporation (the "Company").

WHEREAS, the Executive is employed by the Company; and

WHEREAS, pursuant to the terms of the Company's 1997 Equity Incentive Plan
and the stock option agreements between the Company and the Executive, the
Company has granted to the Executive options to purchase shares of its common
stock (the "Options"); and

WHEREAS, the Company desires to provide for accelerated vesting of the
Options upon the occurrence of certain events.

NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties hereto agree as follows:

1. TERM OF AGREEMENT. This Agreement shall remain in effect from the
date hereof until the earlier of:

(a) The date when the Executive's employment with the Company
terminates for any reason not described in Section 5(a); or

(b) The date when the Company has met all of its obligations under
this Agreement following a termination of the Executive's employment with
the Company for a reason described in Section 5(a).

2. DEFINITION OF CHANGE IN CONTROL. For purposes of this Agreement, "Change
in Control" shall mean the occurrence of any of the following events after the
date of this Agreement:

(a) The consummation of a merger or consolidation of the Company with
or into another entity or any other corporate reorganization, if more than
50% of the combined voting power of the continuing or surviving entity's
securities outstanding immediately after such merger, consolidation or
other reorganization is owned by persons who were not stockholders of the
Company immediately prior to such merger, consolidation or other
reorganization; provided that any rights Executive may become entitled to
due to such commitment shall not be effective until the consummation of
such merger, consolidation or other corporate reorganization;

(b) The sale, transfer or other disposition of all or substantially
all of the Company's assets;

(c) A change in the composition of the Board, as a result of which
fewer than 66% of the incumbent directors are directors who either (i) had
been directors of the Company on the date 24 months prior to the date of
the event that may constitute a Change in Control (the "original
directors") or (ii) were elected, or nominated for election, to the Board
with the affirmative votes of at least a majority of the aggregate of the
original directors who were still in office at the time of the election or
nomination and the directors whose election or nomination was previously so
approved; or

(d) Any transaction as a result of which any person is the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing at least 50% of the
total voting power represented by the Company's then outstanding voting
securities. For purposes of this Subsection (d), the term "person" shall
have the same meaning as when used in sections 13(d) and 14(d) of the
Exchange Act but shall exclude (i) a trustee or

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other fiduciary holding securities under an employee benefit plan of the
Company or of subsidiary of the Company and (ii) a corporation owned
directly or indirectly by the stockholders of the Company in substantially
the same proportions as their ownership of the common stock of the Company.

(e) The entry by the Company into an agreement to affect any
transaction evidenced in Sections 2(a)-(d) hereof.

A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company's incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company's securities immediately before such transaction.

Notwithstanding any other provision in this Agreement, the rights of Executive
upon the occurrence of a Change in Control, as defined in Section 2(e) hereof,
shall not be effective until the transaction referenced therein occurs.

3. DEFINITION OF GOOD REASON. For purposes of this Agreement, "Good Reason"
shall mean that the Executive:

(i) Has incurred a reduction in his title, authority or
responsibilities as an employee of the Company, including, but not
limited to, (1) a reduction or elimination of his authority to approve
expenditures, (2) a reduction of his authority to hire, promote,
demote or terminate subordinates, (3) a reduction in the number of
employees reporting to him, except as a result of a Company-wide
reduction of employees generally as a result of poor financial
performance of the Company, (4) a change in his reporting relationship
such that he no longer reports to the Company's Chief Executive
Officer or President, (5) a material increase in his travel
obligations, or (6) if a successor (whether direct or indirect and
whether by purchase, lease, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company's business
and/or assets, does not, by an agreement in substance and form
satisfactory to the Executive, assume this Agreement and agree
expressly to perform this Agreement in the same manner and to the same
extent as the Company would be required to perform it in the absence
of a succession

(ii) Has incurred a reduction in his base salary, other than
pursuant to a Company-wide reduction of salaries for employees of the
Company generally;

(iii) Has incurred a reduction in his opportunity to earn a cash
bonus, other than pursuant to a reduction of bonus opportunities for
executives of the Company generally;

(iv) Has been regularly excluded from consideration of matters
within his present area of responsibility;

(v) Has been subjected to procedures not generally applicable to
other executives of the Company; or

(vi) Has been notified that his principal place of work as an
employee of the Company will be relocated by a distance of 30 miles or
more.

4. DEFINITION OF CAUSE. For purposes of this Agreement, "Cause" shall mean:

(a) The unauthorized use or disclosure of the confidential information
or trade secrets of the Company, which use or disclosure causes material
harm to the Company;

(b) Conviction of, or a plea of "guilty" or "no contest" to, a felony
under the laws of the United States or any state thereof which has an
adverse effect on the Company;

(c) Intentional failure to perform material duties as the Chief
Financial Officer of the Company or a duty in reckless disregard of
the consequences of action taken by the Executive; or

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(d) Continued failure to perform assigned duties after receiving
written notification from the Board of Directors.

The items set forth above identify the acts or omissions that constitute
"Cause". These items are not an exclusive list of all acts or omissions that the
Company (or a subsidiary of the Company) may consider as grounds for the
discharge of the Employee.

5. CONDITIONS FOR VESTING OF STOCK OPTIONS.

(a) TERMINATION OF EMPLOYMENT. The Executive shall be entitled to the
accelerated vesting of stock options described in Section 6 if one of
the following events occurs:

(i) If after a Change in Control, the Executive voluntarily
resigns his employment for Good Reason; or

(ii) If after a Change in Control, the Company terminates the
Executive's employment for any reason other than Cause.

(b) CHANGE IN CONTROL. The limitations set forth below must be met in
addition to those in Paragraph 5(a) before the Executive shall be
entitled to the accelerated vesting of stock options described in
Section 6 upon a Change in Control:

(i) In the case of both ISOs and NSOs the acceleration of
exercisability shall not occur without the Optionee's written
consent, and

(ii) The Optionee may consent to acceleration of exercisability
separately as to ISOs, NSOs and/or as to a specified number of
shares subject to an ISO or NSO.

(c) POOLING OF INTERESTS. Subsection (a) above notwithstanding, if the
Company and the other party to the transaction constituting a Change in
Control agree that such transaction is to be treated as a "pooling of
interests" for financial reporting purposes, and if such transaction in
fact is so treated, then the accelerated vesting of stock options described
in Section 6 shall not occur to the extent that the Company's independent
public accountants and such other party's independent public accountants
separately determine in good faith that such acceleration would preclude
the use of "pooling of interests" accounting. If the accountants determine
that such acceleration would preclude the use of "pooling of interests"
accountings, Executive's options shall continue to vest as provided in the
stock option agreement(s) and Section 6 of this Agreement.

6. SCOPE OF VESTING OF STOCK OPTIONS. If the conditions described in
Section 5 are satisfied, then the Executive's stock options shall vest as
follows:

(a) All options to purchase shares of the Company's Common Stock held
by the Executive at the time of his termination of employment by the
Company for any reason other than Cause, or his voluntary resignation for
Good Reason, shall immediately become vested and exercisable in full,
whether such options were granted before or after the date of this
Agreement.

However, if and to the extent that the Executive elects not to accelerate
the vesting and exercisability of certain ISOs or NSOs, then the Executive
vesting and exercisability rights shall remain in effect as specified in
any Equity Incentive Agreement with the Company, except that all provisions
terminating vesting or requiring exercise before or within a specified time
period ending on or subsequent to termination of Employment shall lapse and
Executive shall continue to vest in his options or stock as if his
employment were continuing. Exercise rights shall terminate only at the
expiration of the term of the Option.

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(b) All shares of the Company's Common Stock held by the Executive at
the time of his employment termination shall immediately vest in full and
the Company's right to repurchase such shares shall lapse, whether such
shares were issued before or after the date of this Agreement.

To the extent provided in this Section 6, this Agreement shall be deemed to be
an amendment of the exercisability and vesting provisions of all stock option
agreements, stock purchase agreements and similar instruments executed by the
Executive and the Company.

7. CONDITIONS FOR SEVERANCE PAYMENTS.

(a) TERMINATION OF EMPLOYMENT. In addition to the accelerated vesting
of stock options described in Sections 5 and 6 above, the Executive shall
be entitled to receive a severance payment (the "Severance Payment") equal
to twelve (12) months of his base salary as it exists immediately prior to
the Change in Control if one of the following events occurs:

(i) If after a Change in Control, the Executive voluntarily
resigns his employment for Good Reason; or

(ii) If after a Change in Control, the Company terminates the
Executive's employment for any reason other than Cause.

(b) POOLING OF INTERESTS. Subsection (a) above notwithstanding, if the
Company and the other party to the transaction constituting a Change in
Control agree that such transaction is to be treated as a "pooling of
interests" for financial reporting purposes, and if such transaction in
fact is so treated, then the Severance Payment described in Section 7 shall
not occur to the extent that the Company's independent public accountants
and such other party's independent public accountants separately determine
in good faith that such acceleration would preclude the use of "pooling of
interests" accounting.

8. LIMITATION ON PAYMENTS.

Any other provision of this Agreement notwithstanding, the Company shall be
required to make any payment or property transfer to, or for the benefit of, the
Executive (under this Agreement or otherwise) even if it would be nondeductible
by the Company by reason of section 280G of the Internal Revenue Code of 1986,
as amended (the "Code"), or would subject the Executive to the excise tax
described in section 4999 of the Code. All calculations required by this Section
8 shall be performed by the independent auditors retained by the Company most
recently prior to the Change in Control (the "Auditors"), based on information
supplied by the Company and the Executive, and shall be binding on the Company
and the Executive. All fees and expenses of the Auditors shall be paid by the
Company.

9. SUCCESSORS.

(a) COMPANY'S SUCCESSORS. The Company shall require any successor
(whether direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) to all or substantially all of the
Company's business and/or assets, by an agreement in substance and form
satisfactory to the Executive, to assume this Agreement and to agree
expressly to perform this Agreement in the same manner and to the same
extent as the Company would be required to perform it in the absence of a
succession. For all purposes under this Agreement, the term "Company" shall
include any successor to the Company's business and/or assets which
executes and delivers the assumption agreement described in this subsection
(a) or which becomes bound by this Agreement by operation of law.

(b) EXECUTIVE'S SUCCESSORS. This Agreement and all rights of the
Executive hereunder shall inure to the benefit of, and be enforceable by,
the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.

10. MERGER OF PRIOR AGREEMENTS; CONFLICTING PROVISIONS. The provisions of
this Agreement and the provisions of any other agreement entered into by and
between the Company and the Executive related to the subject

A-4
<PAGE>

matter hereof shall be applied and interpreted in a manner consistent with each
other so as to carry out the purposes and intent of the parties hereof.
Notwithstanding the foregoing, to the extent the provisions of this Agreement
and the provisions of any other agreement entered into by and between the
Company and the Executive related to the subject matter hereof conflict, the
provisions of this Agreement shall govern.

11. TAIL INSURANCE. If the Company purchases a tail insurance policy to
cover directors of the Company prior to the Change in Control for any period of
time after the Change in Control, the Company shall purchase the same coverage
for the Executive.

12. MISCELLANEOUS PROVISIONS.

(a) NOTICE. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified
mail, return receipt requested and postage prepaid. In the case of the
Executive, mailed notices shall be addressed to him at the home address
which he most recently communicated to the Company in writing. In the case
of the Company, mailed notices shall be addressed to its corporate
headquarters, and all notices shall be directed to the attention of its
Secretary.

(b) WAIVER. No provision of this Agreement shall be modified, waived
or discharged unless the modification, waiver or discharge is agreed to in
writing and signed by the Executive and by an authorized officer of the
Company (other than the Executive). No waiver by either party of any breach
of, or of compliance with, any condition or provision of this Agreement by
the other party shall be considered a waiver of any other condition or
provision or of the same condition or provision at another time.

(c) SEVERABILITY. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full
force and effect.

(d) NO RETENTION RIGHTS. This Agreement does not confer upon the
Executive any right to continued employment with the Company for any period
of specific duration. The Company or any subsidiary of the Company and the
Executive each hereby expressly reserve their rights to terminate the
Executive's employment at any time and for any reason, with or without
Cause.

(e) CHOICE OF LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Minnesota.

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the day and year first
above written.

Kurt Betcher

INFORMATION ADVANTAGE, INC.

By: Larry J. Ford
Its: President and Chief Executive Officer

A-5
<PAGE>

EXHIBIT B

INFORMATION ADVANTAGE, INC.

INCENTIVE STOCK OPTION AGREEMENT

1997 EQUITY INCENTIVE PLAN

Information Advantage, Inc., a Delaware corporation (the "Company"), has
granted to Kurt Betcher (the "Optionee"), an option (the "Option") to purchase a
total of 130,000 shares of common stock of the Company (the "Common Shares"), at
the price set forth herein, and in all respects subject to the terms,
definitions and provisions of this Agreement and the Information Advantage, Inc.
1997 Equity Incentive Plan (as Adopted Effective September 24, 1997), as amended
from time to time (the "Plan"), which is incorporated herein by reference.
Unless otherwise defined herein, the terms used herein shall have the
definitions and meanings set forth in the Plan.

1. NATURE OF THE OPTION. This Option is intended to qualify as an Incentive
Stock Option as defined in Section 422 of the Code.

2. EXERCISE PRICE. The Exercise Price is $7.75 for each Common Share, which
Exercise Price is not less than the Fair Market Value per Common Share on the
date of grant set forth below (the "Date of Grant").

3. EXERCISE OF OPTION. This Option shall be exercisable during its term in
accordance with the provisions of this Agreement and the Plan as follows:

a. RIGHT TO EXERCISE.

i. Subject to the other terms and conditions in this Agreement
and the Plan, Optionee may exercise this Option as provided in this
subsection 3(i)(a). Commencing on the Date of Grant, this Option may
be exercised by Optionee as follows:

Cumulative percentage of
Years expired since Common Shares as to
Date of Grant Which Option Is Exercisable
------------------- ---------------------------
<S> <C>
0 0%
1 20%
2 40%
3 60%
4 80%
5 100%

</TABLE>

ii. This Option may not be exercised for a fraction of a share or
for less than fifty (50) shares.

iii. In the event of Optionee's death, Disability or termination
of employment, the exercisability of the Option is governed by
Sections 7 and 8 below.

iv. In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in Section 10
below.

B-1
<PAGE>

v. Upon a Change in Control, this Option shall be exercisable in
accordance with Section 5.5 of the Plan and in accordance with any
Severance Agreement between the Optionee and the Company.

vi. This Option shall be treated as a nonstatutory stock option
to the extent that the aggregate fair market value of common shares
with respect to which any incentive stock option, granted under any
incentive stock option plan of the Company and exercisable for the
first time by Optionee during any calendar year exceeds $100,000. For
purposes of the preceding sentence, (i) incentive stock options which
are accelerated after a change in control shall be accelerated so that
the last options to vest under the normal vesting schedule shall be
the first options to be accelerated, and (ii) the fair market value of
shares issued pursuant to the exercise to incentive stock options
shall be determined as of the time the incentive stock option with
respect to such shares was granted.

b. METHOD OF EXERCISE. This Option shall be exercisable by written
notice which shall state the election to exercise the Option, the number of
Common Shares in respect of which the Option is being exercised, and such
other representations and agreements as to the Optionee's investment intent
with respect to such Common Shares as may be required by the Company
pursuant to the provisions of the Plan. Such written notice shall be signed
by the Optionee and shall be delivered in person or by certified mail to
the Controller of the Company. The written notice shall be accompanied by
payment of the Exercise Price. This Option shall be deemed to be exercised
upon receipt by the Company of such written notice accompanied by the
timely payment of the Exercise Price.

No Common Shares will be issued pursuant to the exercise of this Option
unless such issuance and such exercise shall comply with all relevant provisions
of law and the requirements of any stock exchange upon which the Common Shares
may then be listed. Assuming such compliance, for income tax purposes the Common
Shares shall be considered transferred to the Optionee on the date on which the
Option is exercised with respect to such Common Shares.

4. OPTIONEE'S REPRESENTATIONS. In the event the Common Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933 ("Act"), as amended, at the time this Option is
exercised, Optionee shall, concurrent with the exercise of all or any portion of
this Option, deliver to the Company an investment representation statement in
the form requested by the Company.

5. METHOD OF PAYMENT. Payment of the Exercise Price shall be by (i) cash or
(ii) check, bank draft or money order.

6. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the
issuance of Common Shares upon such exercise or the method of payment of
consideration for such Common Shares would constitute a violation of any
applicable federal or state securities or other law or regulation. As a
condition to the exercise of this Option, the Company may require Optionee to
make any representation and warranty to the Company as may be required by any
applicable law or regulation.

7. TERMINATION OF EMPLOYMENT. Upon the termination of the employment of
Optionee prior to the expiration of the Option, the following provisions shall
apply:

a. Upon the Involuntary Termination of Optionee's employment, as
defined in Section 19.15 of the Plan, or the voluntary termination or
resignation of Optionee's employment, the Optionee may exercise the Option
to the extent the Optionee was entitled to exercise the Option at the date
of such employment termination for a period of thirty (30) days after the
date of such employment termination, or until the term of the Option has
expired, whichever date is earlier. To the extent the Optionee was not
entitled to exercise this Option at the date of such employment
termination, or if Optionee does not exercise this Option within the time
specified herein, this Option shall terminate.

B-2
<PAGE>

b. Upon the termination of Optionee's employment for Cause, as defined
in Section 19.4 of the Plan, the Option shall terminate immediately.

8. DEATH OR DISABILITY OF OPTIONEE. Upon the death or Disability, as
defined herein, of Optionee prior to the expiration of the Option, the following
provisions shall apply:

a. If the Optionee is at the time of his or her Disability employed by
the Company, a Parent, a Subsidiary or an Affiliate, and has been in
continuous employment (as determined by the Committee in its sole
discretion) since the Date of Grant of the Option, then the Option may be
exercised by the Optionee for one (1) year following the date of such
Disability or until the expiration date of the Option, whichever date is
earlier, but only to the extent the Optionee was entitled to exercise the
Option at the time of his or her Disability. For purposes of this Section
8, the term "Disability" shall mean a permanent and total disability as
defined in Section 22(e)(3) of the Code, unless the Optionee is employed by
the Company, a Parent, a Subsidiary or an Affiliate, pursuant to an
employment agreement which contains a definition of "Disability," in which
case such definition shall control. The Committee, in its sole discretion,
shall determine whether an Optionee has a Disability and the date of such
Disability.

b. If the Optionee is at the time of his or her death employed by the
Company, a Parent, a Subsidiary or an Affiliate, and has been in continuous
employment (as determined by the Committee in its sole discretion) since
the Date of Grant of the Option, then the Option may be exercised by the
Optionee's estate or by a person who acquired the right to exercise the
Option by will or the laws of descent and distribution, for one (1) year
following the date of the Optionee's death or until the expiration date of
the Option, whichever date is earlier, but only to the extent the Optionee
was entitled to exercise the Option at the time of death.

c. If the Optionee dies within thirty (30) days after the Involuntary
Termination of Optionee's employment with the Company, a Parent, a
Subsidiary or an Affiliate the Option may be exercised for nine (9) months
following the date of Optionee's death or the expiration date of the
Option, whichever date is earlier, by the Optionee's estate or by a person
who acquires the right to exercise the Option by will or the laws of
descent or distribution, but only to the extent the Optionee was entitled
to exercise the Option at the time of Involuntary Termination.

9. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution, and may
be exercised during the lifetime of Optionee only by him or her. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.

10. TERM OF OPTION. This Option may not be exercised more than ten (10)
years from the Date of Grant of this Option, and may be exercised during such
term only in accordance with the Plan and the terms of this Agreement.

11. ADJUSTMENT OF NUMBER OF COMMON SHARES. In accordance with Article 11 of
the Plan, the Committee shall adjust the number of Common Shares as to which
this Option is exercisable as it, in its sole discretion, deems appropriate.

12. EARLY DISPOSITION OF STOCK. Optionee understands that if he or she
disposes of any Common Shares received under this Option within two (2) years
after the Date of Grant or within one (1) year after such Common Shares were
transferred to him or her, he or she will be treated for federal income tax
purposes as having received ordinary income at the time of such disposition in
an amount generally measured by the difference between the price paid for the
Common Shares and the lower of the fair market value of the Common Shares at the
date of the exercise or the fair market value of the Common Shares at the date
of disposition. The amount of such ordinary income may be measured differently
if Optionee is an officer, director or ten percent (10%) shareholder of the
Company, or if the Common Shares were subject to a substantial risk of
forfeiture at the time they were transferred to Optionee. OPTIONEE HEREBY AGREES
TO NOTIFY THE COMPANY IN WRITING WITHIN 30 DAYS AFTER THE DATE OF ANY SUCH

B-3
<PAGE>

DISPOSITION. Optionee understands that if he or she disposes of such Common
Shares at any time after the expiration of such two-year and one-year holding
periods, any gain on such sale will be taxed as long-term capital gain.

13. CONFLICT BETWEEN THIS AGREEMENT AND THE PLAN. This Option is subject
to, and the Company and the Optionee agree to be bound by, all of the terms and
conditions of the Plan, as the same may be amended from time to time in
accordance with its terms. Pursuant to the Plan, the Committee is vested with
conclusive authority to interpret and construe the Plan and this Agreement, and
is authorized to adopt rules and regulations for carrying out the Plan. A copy
of the Plan is available for inspection during business hours by the Optionee at
the Company's principal office. In the event there is any inconsistency or
discrepancy between the provisions of this Agreement and the terms and
conditions of the Plan, the terms and conditions of the Plan, as interpreted by
the Committee, shall govern and prevail.

14. NOTICES. Any notice to be given to the Company shall be addressed to
the Company in care of its Controller at its principal office, and any notice to
be given to the Optionee shall be addressed to the Optionee at the address set
forth beneath the Optionee's signature hereto, or at such other address as the
Optionee may hereafter designate in writing to the Company. Any such notice
shall be deemed duly given when addressed as above and delivered in person, or
when deposited with the United States Postal Service by registered or certified
mail, return receipt requested, or when deposited with a courier with written
evidence of receipt.

15. RULES OF CONSTRUCTION. This Agreement and the Plan shall be construed
and enforced in accordance with the laws of the State of Delaware, other than
any choice of law rules as applied in the State of Delaware.

DATE OF GRANT: January 8, 1999 INFORMATION ADVANTAGE, INC.

By:
---------------------------------------
Larry J. Ford
Title: President and Chief Executive
Officer

B-4
<PAGE>

OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF THE OPTION IS EARNED ONLY
BY THE CONTINUATION OF EMPLOYMENT OF OPTIONEE AT THE WILL OF THE COMPANY (NOT
THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING COMMON
SHARES HEREUNDER), UNLESS OTHERWISE SPECIFICALLY PROVIDED FOR IN A SEVERANCE
AGREEMENT ENTERED INTO BETWEEN THE OPTIONEE AND THE COMPANY ON THE DATE HEREOF.
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE GRANT OF THIS OPTION IS PROVIDED AS
ADDITIONAL CONSIDERATION FOR ENTERING INTO A CONFIDENTIALITY AND NON-DISCLOSURE
AGREEMENT ON BEHALF OF THE COMPANY. OPTIONEE ACKNOWLEDGES AND AGREES THAT
NOTHING IN THIS AGREEMENT, NOR IN THE PLAN WHICH IS INCORPORATED HEREIN BY
REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION OF
EMPLOYMENT BY THE COMPANY, A PARENT, A SUBSIDIARY OR AN AFFILIATE, NOR SHALL IT
INTERFERE IN ANY WAY WITH HIS OR HER RIGHT OR THE COMPANY'S RIGHT TO TERMINATE
HIS OR HER EMPLOYMENT AT ANY TIME, WITH OR WITHOUT CAUSE.

Optionee acknowledges receipt of a copy of the Plan and certain information
related thereto and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee has reviewed the Plan and this Option in their
entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Option and fully understands all provisions of the Option.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Committee upon any questions arising under the Plan.
Optionee further agrees to notify the Company upon any sale of the Common
Shares.

Optionee

------------------------------
Kurt Betcher

B-5
<PAGE>

EXHIBIT C

NONCOMPETITION, CONFIDENTIALITY AND INVENTIONS AGREEMENT

I understand that:

A. As part of my employment with INFORMATION ADVANTAGE, INC. a Delaware
corporation, or one of its affiliates (the "Company"), I am expected to make new
contributions and inventions of value to the Company.

B. My employment creates a relationship of confidence and trust between me
and the Company with respect to any information of a confidential or secret
nature: (1) applicable to the business of the Company and its subsidiaries, and
(2) applicable to the business of any customer of the Company, which may be made
known to me by the Company or its subsidiaries or by any customer of the Company
or learned by me during the period of my employment (the "Proprietary
Information").

C. By way of illustration, not limitation, Proprietary Information
includes: (i) software licensed by the Company; (ii) trade secrets, processes,
formulae, data, know-how, improvements, inventions and techniques; (iii)
customer lists and related information; (iv) information concerning design,
construction, configuration, size, dimensions, programming, geometry, internal
mechanisms, internal working and internal functions of software; (v) cost or
expense of research, development, installation, developing, marketing, marketing
surveys or analyses; (vi) pricing or licensing, as well as other financial data
pertaining to any and all present and/or future developments, processes or
devices, or component parts thereof, relating to the Company's business; (vii)
business and strategic plans for the Company; (viii) financial forecasts, models
and projections for the Company; and (ix) all personnel information, including
without limitation employee lists or other information identifying Company
employees, contractors or applicants, personnel files, compensation information,
investigation files, medical records or discipline records.

Notwithstanding the foregoing, Proprietary Information does not
include proprietary data, information relating to the business or activities of
the Company, know-how and other like information set forth above which is (a) in
the public domain at the time of its use or disclosure by me; (b) already known
to me at the time it is first made known to me by the Company; or (c) required
to be disclosed by any official process, order, or other like demand as long as
the Company has been given prior notice of such order, process or demand
adequate to enable the Company to oppose the same.

D. In addition, because of my access to Proprietary Information of the
Company and its customers, including the employees of the Company and its
customers, (i) the Company desires that I agree to certain restrictions on
competition and solicitation of customers and employees of the Company, all as
contained herein, and (ii) I agree that such restrictions are reasonable.

In consideration of my employment, stock options granted in conjunction
herewith, and the compensation and severance payments received from time to
time, I hereby agree as follows:

1. CONFIDENTIALITY OBLIGATION. At all times, both during my employment and
after its termination, I will keep in confidence and trust the Proprietary
Information. I will not use such Proprietary Information other than in the
course of my work for the Company, nor disclose any of such Proprietary
Information or anything related thereto to any third party without the consent
of the Company.

2. OBLIGATIONS UPON TERMINATION. In the event of the termination of my
employment by me or by the Company for any reason, I will deliver to the Company
all documents and data of any nature pertaining to my work and I shall not take
with me any documents or data of any description or any reproduction of any
description containing or pertaining to any Proprietary Information.

C-1
<PAGE>

3. OBLIGATIONS REGARDING INVENTIONS. With respect to information,
inventories and discoveries, including improvements, developed, made or
conceived by me, either alone or with others, at any time, within or without
normal working hours, during my employment by the Company, arising out of such
employment, or pertinent to any field of business or research in which, during
such employment, the Company is engaged or (if such is known to or ascertainable
by me) is considering engaging, I agree:

(a) That all such information, inventions and discoveries, whether or
not patented or patentable, shall be and remain the sole property of the
Company.

(b) To disclose promptly to an authorized representative of the
Company all information, inventions and discoveries, and all information in my
possession as to possible applications thereof to industry and other uses
thereof or therefor.

(c) Not to file any patent applications or copyright registrations
relating to any such invention or discovery except with the prior consent of an
authorized representative of the Company.

(d) At the request of the Company, and without expense to me, to
execute such documents and perform such other acts as the Company deems
necessary to obtain patents or to register copyrights on such inventions and
discoveries in any jurisdiction or jurisdictions and to assign to the Company or
its designees such inventions and discoveries and any patent applications,
whether or not active, any patents relating thereto, and any copyrights therein.

4. EXCEPTIONS. My obligation to assign inventions to the Company does not
apply to an invention for which no equipment, supplies, facility, or trade
secret information of the Company was used and was developed entirely on my own
time, and (a) which does not relate (1) to the business of the Company or (2) to
the Company's actual or demonstrable anticipated research or development, or (b)
which does not result from any work performed by me for the Company.

5. EXISTING INVENTIONS. As a matter of record, I attach hereto a complete
list of inventions which have been made or conceived or first reduced to
practice by me alone or jointly with others prior to my employment which I
desire to remove from the operation of this Agreement; and I covenant that such
list is complete. If no such list is attached to this agreement, I represent
that I have not made, conceived or reduced to practice any such inventions and
improvements at the time of signing this agreement.

6. PRESUMPTION REGARDING DATE OF INVENTION. If any application for any
United States or foreign patent related to or useful in the business of the
Company or its subsidiaries or any customer of the Company shall be filed by me
or for me during the period of one (1) year after the termination of my
employment, the subject matter covered thereby shall be presumed to have been
conceived during my employment with the Company.

7. OTHER CONFIDENTIALITY AGREEMENTS. I represent that my performance of all
the terms of this agreement, and as an employee of the Company, does not and
will not breach any agreement to keep in confidence proprietary information
acquired by me in confidence or in trust prior to my employment with the Company
and I agree not to enter into any agreement either written or oral in conflict
herewith.

8. RESTRICTION ON COMPETITION. I acknowledge that the Company needs to be
protected against the potential for unfair competition and impairment of the
Company's goodwill by my use of the Company's training, assistance, confidential
information and trade secrets in direct competition with the Company. I
therefore agree that during the term of my employment with the Company and for
the greater of (a) six months after the termination of my employment with cause
("cause" shall have the meaning set forth in the Severance Agreement between me
and the Company dated as of January 8, 1999) or my resignation without Good
Reason ("Good Reason" shall have the meaning set forth in the Severance
Agreement between me and the Company dated as of January 8, 1999) or (b) the
period of time that I am entitled to receive severance pay from the Company
after the termination of my employment (the "Noncompete Period"), I shall not,
directly or indirectly, operate, join, control, be employed by or participate in
ownership, management, operation or control of, or be connected in any manner as
an independent contractor, consultant or otherwise, with any person or
organization engaged in any business activity which is

C-2
<PAGE>

competitive with any business of the Company or any successor of the Company at
the termination of my employment within the states of the United States of
America. I expressly agree the provisions of this paragraph 8 shall survive the
expiration or the termination of this Agreement, whether such termination be
voluntary or involuntary or with or without cause.

I also agree that in addition, but not to the exclusion of any other
available remedy, the Company shall have the right to enforce the provisions of
this non-competition agreement by applying for and obtaining temporary and
permanent restraining orders or injunctions from a court of competent
jurisdiction without the necessity of filing a bond therefor. In any such court
action, the prevailing party shall be entitled to recover its reasonable
attorneys' fees and costs from the other party.

9. COVENANT NOT TO SOLICIT CUSTOMERS. I shall not, during the Noncompete
Period, directly or indirectly, including through third party brokers or agents,
(i) solicit any software or software consulting business of any customer of the
Company who is a customer at the time of the termination of my employment or
during the one year period prior thereto; or (ii) cause or attempt to cause any
then existing or prospective customer, client or account to divert, terminate,
limit or in any manner modify or fail to enter into any actual or potential
business relationship with the Company.

10. COVENANT NOT TO RECRUIT EMPLOYEES. I recognize that the Company's work
force constitutes an important and vital aspect of its business. I agree that
during the term of my employment and for a period of two (2) years after the
termination of my employment for any reason whatsoever, I shall not, directly or
indirectly, solicit, or assist anyone else in the solicitation of, any of the
Company's then current employees to terminate their employment with the Company,
and to become employed by any business enterprise with which I may then be
associated or connected, whether as an owner, employee, partner, agent,
investor, consultant, contractor or otherwise.

11. GOVERNING LAW. This Agreement, and any disputes or issues related
thereto, shall be governed by the internal laws of the State of Minnesota.

12. VENUE. Any dispute related to or arising out of this Agreement shall be
resolved in the state or federal courts in Hennepin County, Minnesota.

13. SCOPE OF AGREEMENT. This Agreement supersedes any prior agreements
between the Company and me regarding the subject matter hereof. The terms of
this Agreement may only be amended or modified in a writing executed by the
Company and me.

14. EFFECTIVE DATE. This agreement shall be effective as of the date
hereof.

Dated as of: January 8, 1999 ------------------------------------
Kurt Betcher

INFORMATION ADVANTAGE, INC.

By:
-------------------------------
Larry J. Ford
Its: President and CEO

C-3

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 333-44635, 333-47913, 333-61299, 333-64361,
333-65621, and 333-67075) of Information Advantage, Inc. of our report dated
March 3, 1999 appearing in this Annual Report on Form 10-K.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Minneapolis, Minnesota

April 26, 1999

<PAGE>

EXHIBIT 23.2

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 333-44635, 333-47913, 333-61299, 333-64361, 333-65621 and
333-67075) of our report dated February 20, 1998, with respect to the
consolidated financial statements of IQ Software Corporation as of January
31, 1998 and for each of the two years in the period then ended, included in
the Annual Report (Form 10-K) for the year ended January 31, 1999.

/s/ ERNST & YOUNG LLP

Atlanta, Georgia
April 26, 1999

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND
WITHIN THIS FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<CASH> 20,041
<SECURITIES> 12,725
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0
0
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</TABLE>