Our product brands, solutions and related markets are summarized below:

                                      Enterprise              Postilion
                                     S1 Enterprise       Postilion       FSB

             Self Service Banking
             Online Banking
             Personal Banking                Global              US         -
             Business Banking                Global              US         -
             Bill pay services                   US              US         -
             Corporate Banking               Global               -         -
             Trade Finance                   Global               -         -
             Mobile Banking                  Global          Global         -
             Voice Banking                   Global              US         -

             Full Service Banking
             Teller                          Global               -        US
             Sales and Service               Global               -        US
             Call Center                     Global               -        US
             Lending                              -               -        US

             Payments                             -          Global         -

             Insurance                           US               -         -

Revenue from Significant Customers
Revenue from State Farm was 18%, 21% and 25% of our revenue from continuing operations and 33%, 39% and 48% of our Enterprise segment revenue during the years ended December 31, 2008, 2007 and 2006, respectively. In 2008, we announced that we expected our relationship with State Farm to conclude by the end of 2011. We expect approximately $80 million in revenue from State Farm from 2009 until our work for them concludes by the end of 2011, of which we expect approximately $35 - $37 million in revenue in 2009. Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Generally, we base our estimates on historical experience and on various other assumptions in accordance with U.S. GAAP that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under other assumptions or conditions.
Critical accounting policies and estimates are those that we consider the most important to the portrayal of our financial condition and results of operations because they require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. See further discussion of all the accounting policies in Note 2 to the consolidated financial statements. Our critical accounting policies and estimates include those related to:
• revenue recognition;

• estimation of our allowance for doubtful accounts and billing adjustments;

• valuation and recoverability of long-lived assets, including goodwill;

• determination of technological feasibility and capitalization of software development costs;

• determination of the fair value of employee stock options and stock appreciation rights awards;

• recognition of costs in connection with restructuring plans;

• reserves for contingencies; and

• income taxes.

Revenue recognition. Revenue is a key component of our results of operations and is a key metric used by management, securities analysts and investors to evaluate our performance. Our revenue generally includes multiple element arrangements such as license fees for software products, implementation and customization services, training, post-contract customer support, hosting and data center services and, in some cases, hardware or other third party products and services.
Software licenses revenue. We recognize software license sales in accordance with Statement of Position No. 97-2, "Software Revenue Recognition," and SOP No. 98-9, "Modification of SOP No. 97-2 With Respect to Certain Transactions," as well as applicable Technical Practice Aids issued by the American Institute of Certified Public Accountants. For software license sales for which professional services rendered are not considered essential to the functionality of the software, we recognize revenue upon delivery of the software provided
(1) there is evidence of an arrangement, (2) collection of our fee is reasonably assured, and (3) the fee is fixed or determinable. In certain of these arrangements, vendor specific objective evidence of fair value exists to allocate the total fee to all elements of the arrangement. If vendor specific objective evidence of fair value does not exist for the delivered element and exists for all undelivered elements, we use the residual method under SOP No. 98-9. When professional services are considered essential to the functionality of the software, we record revenue for the perpetual license and professional services over the implementation period using the contract accounting method on a contract by contract basis, typically measured by the percentage of cost incurred to date to estimated total costs to complete the contract. We typically use labor hours to estimate contract costs. Contract costs generally include direct labor, contractor costs and indirect costs identifiable with or allocable to the contracts. For subscription license arrangements where we sell customers the rights to unspecified products as well as unspecified upgrades and enhancements during a specified term, the license revenue is recognized ratably over the term of the arrangement. For license arrangements in which the fee is not considered fixed or determinable, the license revenue is generally recognized as payments become due. Support and maintenance revenue. Revenue for post-contract customer support and maintenance is recognized ratably over the contract period. Professional services revenue. Revenue derived from arrangements to provide professional services on a time and materials basis is recognized as the related services are performed. For professional services revenue that is provided on a fixed fee basis, revenue is recognized pursuant to SAB 104 "Revenue Recognition" on a proportional performance method which is generally based upon labor hours incurred as a percentage of total estimated labor hours to complete the project. Provisions for estimated losses on incomplete contracts are made in the period in which such losses are determined. Data center revenue. We consider the applicability of Emerging Issues Task Force Issue No. 00-03, "Application of AICPA Statement of Position 97-2 to Arrangements That Include the Right to Use Software Stored on Another Entity's Hardware," to our data center arrangements on a contract-by-contract basis. If it is determined that a software element covered by SOP No. 97-2 is present in a hosting arrangement, the license, professional services and data center revenue is recognized pursuant to SOP No. 97-2. If it is determined that a software element covered by SOP No. 97-2 is not present in a hosting arrangement, we recognize data center revenue in accordance with Staff Accounting Bulletin No. 104 and Emerging Issues Task Force 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables." Our contractual arrangement are evaluated on a contract-by-contract basis and often require our judgment and estimates that affect the classification and timing of revenue recognized in our statements of operations. Specifically, we may be required to make judgments about:
• whether the fees associated with our products and services are fixed or determinable;

• whether the collection of our fees is reasonably assured;

• whether professional services are essential to the functionality of the related software product;

• whether we have the ability to make reasonably dependable estimates in the application of the percentage of completion and proportional performance methods; and

• whether we have vendor specific objective evidence of fair value for our products and services.

Additionally, we may be required to make the following estimates:
• percentage of labor hours incurred to date to the estimated total labor hours for each contract;

• provisions for estimated losses on uncompleted contracts; and

• the need for an allowance for doubtful accounts or billing adjustments.

If other judgments or assumptions were used in the evaluation of our revenue arrangements, the timing and amounts of revenue recognized may have been significantly different. For instance, many of our software license revenue arrangements in our Enterprise segment are accounted for using the percentage of completion method since the services are considered essential to the functionality of the software. If it was determined that those services were not essential to the functionality of the software, we may have recognized the license revenue upon delivery of the license, provided other required criteria were satisfied. Further, if we determined that we cannot make reasonably dependable estimates in the application of the percentage of completion method, we would defer all revenue and recognize the revenue upon completion of the contract.
See a full discussion of our revenue recognition policies in Note 2 to the consolidated financial statements.
Estimation of allowance for doubtful accounts and billing adjustments. We are required to report accounts receivable at the amount we expect to collect from our customers. As a result, we are required to use our judgment to estimate the likelihood that certain receivables may not be collected or that we might offer future discounts or concessions for previously billed amounts. Accordingly, we have established a discount allowance for estimated billing adjustments and a bad debt allowance for estimated amounts that we will not collect. We report provisions for billing adjustments as a reduction of revenue and provisions for bad debts as a component of selling and marketing expense. We review specific accounts for collectibility based on circumstances known to us at the date of our financial statements. In addition, we maintain reserves based on historical billing adjustments and write-offs, and historical discounts, concessions and bad debts, customer concentrations, customer credit-worthiness and current economic trends. Accordingly, our judgments and estimates about the collectibility of our accounts receivable affect revenue, selling expense and the carrying value of our accounts receivable.
Valuation and recoverability of long-lived assets, including goodwill. We evaluate the recoverability of long-lived assets, including goodwill, whenever events or changes in circumstances indicate that the carrying amount should be assessed by comparing their carrying value to the undiscounted estimated future net operating cash flows expected to be derived from such assets. If such evaluation indicates a potential impairment, we use discounted cash flows to measure fair value in determining the amount of the long-lived assets that should be written off. Factors we consider important which could trigger an impairment review include, but are not limited to, the following:
• significant under-performance relative to expected historical or projected future operating results;

• significant changes in the manner of our use of the acquired assets or the strategy of our overall business;

• significant negative industry or economic trends;

• significant decline in our stock price for a sustained period; and

• our market capitalization relative to net book value.

SFAS No. 142, "Goodwill and Other Intangible Assets" requires us to perform an annual test of goodwill value to determine whether or not it has been impaired. Based on the results of our annual tests, the fair value of our reporting units exceeds their carrying value. While we no longer record amortization expense for goodwill and other indefinite lived intangible assets, future events and changes in circumstances may require us to record a significant impairment charge in any given period.
Determination of technological feasibility and capitalization of software development costs.We are required to assess when technological feasibility occurs for products that we develop. Based on our judgment, we have determined that technological feasibility for our products generally occurs when we complete beta testing. Due to the insignificant amount of costs incurred between completion of beta testing and general customer release, we have not capitalized any software development costs in the accompanying consolidated financial statements. If we determined that technological feasibility had occurred at an earlier point in the development cycle and that subsequent production costs incurred before general availability of the product were significant, we would have capitalized those costs and recognized them over future periods. We continue to monitor changes in the software development cycle and may be required to capitalize certain software development costs in the future. Determination of the fair value of equity based compensation. We account for compensation for our stock option plans under SFAS No. 123R, "Stock-based Payments" using the modified prospective method. In determining the fair value, management makes certain estimates related primarily to the expected life of the option, stock appreciation right, or restricted stock and the volatility of our stock. These assumptions affect the estimated fair value of the equity grant. As such, these estimates will affect the compensation expense we record in future periods. Additionally, we are required to estimate forfeitures at the time of grant and adjust them over the requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from their estimates. These estimates affect the timing of the compensation expense we record. We have outstanding stock appreciation rights ("SARs") that are cash settled. Therefore, we revalue our liability to settle the SAR awards each period based on updated valuation which includes, among other factors, our closing stock price for the period.

Recognition of costs in connection with restructuring plans. Following the adoption of SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," we establish a liability for the estimated fair value of exit costs at the date we incur a liability under an approved restructuring plan. At that time and thereafter until the plan activities are complete, the actual costs or timing of payments associated with the plan may differ from our estimates. We use our judgment and information available to us at the date of the financial statements to reevaluate our initial estimates of the exit costs. If we believe that our previous estimates of exit costs or timing of payments are no longer accurate in light of current conditions, we adjust the liability with a corresponding increase or decrease to current period earnings. Any adjustments to estimates of our exit costs under restructuring plans are reflected on the same line item in the statement of operations as the initial charge to establish the restructuring liability. Additionally, in periods subsequent to the initial measurement, we increase the carrying amount of the liability by the amount of accretion recorded as an expense due to the passage of time.
Accrued restructuring costs at year end reflect our estimate of the fair value of future rental obligations and other costs associated with office space that we do not plan to use in our operations as a result of the restructuring plans, offset by our estimate of the fair value of sublease income for this space. The determination of fair value is based on a discounted future cash flow model using a credit-adjusted risk-free rate. While we know the terms of our contractual lease obligations and related future commitments, we must estimate when and under what terms we will be able to sublet the office space, if at all. Such estimates require a substantial amount of judgment, especially given current real estate market conditions. Actual sublease terms may differ substantially from our estimates. Any future changes in our estimates of lease termination reserves could materially impact our financial condition, results of operations and cash flows. See further discussion of these charges in Note 10 to our consolidated financial statements for additional information. Reserve for contingencies. When a loss contingency exists, we are required to evaluate the likelihood that a future event or events will confirm the loss. SFAS No. 5 "Accounting for Contingencies" states that a company must accrue for a loss contingency by a charge to income when information available prior to issuance of the financial statements indicates that it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements, and that the amount of loss can be reasonably estimated. Our reserve for contingencies at year end reflects liabilities including but not limited to loss contract reserves for certain customers.
Income taxes. We released a portion of our valuation allowance for deferred tax assets in 2008. However, we still have a valuation allowance on most of our deferred tax assets. In order to release additional amounts of the valuation allowance, we must show a history of sustained profitability or other positive evidence. At such time, we will make a determination to reverse all or a portion of the remaining valuation allowance based on estimates regarding our future earnings and the recoverability of the deferred tax assets. A portion of any such reversal could have a positive impact on our earnings in the period in which it is reversed. If we continue to sustain profitability in 2009, we will evaluate the possibility of releasing a portion of the valuation allowance in the near future. In the event the valuation allowance is released, the portion of the allowance associated with loss carryforwards generated by stock options will be credited to additional paid-in-capital and will not be reported as a benefit on the statement of operations.
Recent Accounting Pronouncements
Refer to Note 2 to our consolidated financial statements for further discussion regarding the effect of new accounting pronouncements on our financial statements.
Effects of Foreign Currencies
Our revenue and net income were impacted by foreign exchange rate fluctuations mainly for transactions in the British Pound, South African Rand, Indian Rupee and the European Euro. Our operating expenses were impacted mainly for professional services and support, sales and marketing, product development, and general and administrative functions. Generally, expenses are denominated in the same currency as our revenue and the exposure to rate changes is naturally hedged for transactions in the British Pound and European Euro which minimizes the impact to net income. However, our development centers in India and South Africa are not naturally hedged as their costs are in the local currency but are funded in U.S. Dollars and British Pounds. We did not enter into material financial derivatives to hedge our currency risks in 2008, 2007 or 2006. Please refer to Item 7A of Part II, "Quantitative and Qualitative Disclosures about our Market Risk" for further discussions on potential foreign currency risks.

The estimated effect on our consolidated statements of operations from changes in exchange rates versus the U.S. Dollar is as follows (in thousands, except per share data):

                                           Year Ended December 31 , 2008                              Year Ended December 31 , 2007
                                At Prior Year                                              At Prior Year
                                  Exchange            Exchange                               Exchange             Exchange
                                  Rates (1)          Rate Effect        As reported          Rates (1)           Rate Effect        As reported

Revenue                        $       229,775      $      (1,340 )    $     228,435      $       203,005       $       1,920      $     204,925
Operating Expenses                     207,554             (2,470 )          205,084              183,706               2,760            186,466

Operating Income                        22,221              1,130             23,351               19,299                (840 )           18,459
Net Income                              20,470              1,380             21,850               20,345                (850 )           19,495
Diluted earnings per share     $          0.36      $        0.02      $        0.38      $          0.33       $       (0.01 )    $        0.32

(1) Current year results translated into U.S. Dollars using prior year's average rate.

Results of Operations
The following table sets forth our statement of operations data for the three years ended December 31, 2008, 2007 and 2006 and the percentage of total revenue of each line item for the periods presented (dollars in thousands):

                                           2008                       2007                       2006
Revenue:
. . .