1280058--2/26/2010--BLACKBAUD

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{customer, product, revenue}

{product, market, service}

{system, service, information}

{acquisition, growth, future}

{regulation, government, change}

{tax, income, asset}

{property, intellectual, protect}

{personnel, key, retain}

{debt, indebtedness, cash}

{operation, natural, condition}

{stock, price, operating}

{condition, economic, financial}

{cost, operation, labor}

{operation, international, foreign}

General economic factors, both domestically and internationally, might adversely affect our financial performance. A substantial portion of our revenue is derived from The Raiser s Edge and Blackbaud Enterprise CRM, and a decline in sales or renewals of this or similar products and related services could harm our business. We encounter lengthy sales cycles which could have an adverse effect on the amount, timing and predictability of our revenue and sales. We encounter long and complex implementation cycles, particularly for our largest customers, which could have an adverse effect on our profitability and the timing and predictability of our revenue. If our customers do not renew their annual maintenance and support agreements or subscriptions for our products or if they do not renew them on terms that are favorable to us, our business might suffer. We might not generate increased business from our current customers, which could limit our revenue in the future. The Software-as-a-Service (SaaS) pricing model is evolving and demand by our customers for this model is increasing. Our failure to manage its evolution and demand could lead to lower than expected revenues and profits. The market for software and services for nonprofit organizations might not grow and nonprofit organizations might not continue to adopt our products and services. Because a significant portion of our revenue is recognized ratably over the terms of the contract, downturns in sales may not be immediately reflected in our revenue. If the security of our software is breached, we fail to securely collect, store and transmit customer information, or we fail to safeguard confidential donor data our business and reputation could suffer. Privacy and security concerns, including evolving government regulation in the area of consumer data privacy, could adversely affect our business and operating results. If we are unable, or customers believe we are unable, to detect and prevent unauthorized use of credit cards and safeguard confidential donor data, we could be subject to financial liability, our reputation could be harmed and customers may be reluctant to use our products and services. Our services and subscription revenue produces substantially lower gross margins than our license revenue, and changes in the relative mix of these and other sources of revenue could negatively affect our overall gross margins. Our quarterly financial results fluctuate and might be difficult to forecast and, if our future results are below either any guidance we might issue or the expectations of public market analysts and investors, the price of our common stock might decline. Our failure to compete successfully could cause our revenue or market share to decline. If we fail to respond to technological changes to be competitive our business could suffer. If we were found subject to or in violation of any laws or regulations governing privacy or electronic fund transfers, we could be subject to liability or forced to change our business practices. Because competition for highly qualified personnel is intense, we might not be able to attract and retain the employees we need to support our planned growth. If our products fail to perform properly due to undetected errors or similar problems, our business could suffer. Our failure to obtain licenses for third-party technologies could harm our business. We rely upon trademark, copyright, patent and trade secret laws to protect our proprietary rights, which might not provide us with adequate protection. If we do not successfully address the risks inherent in the expansion of our international operations, our business could suffer. Restrictions in our revolving credit facility may limit our activities, including dividend payments, share repurchases and acquisitions. We have recorded a significant deferred tax asset, and we might never realize the full value of our deferred tax asset, which would result in a charge against our earnings. Our ability to utilize our net operating loss carryforwards may be limited. We might not be able to implement our operating unit reorganization successfully. We might face challenges in integrating our recent acquisitions and, as a result, might not realize the expected benefits of these acquisitions. Future acquisitions could prove difficult to integrate, disrupt our business, dilute stockholder value and strain our resources. Increasing government regulation could affect our business. Our operations might be affected by the occurrence of a natural disaster or other catastrophic event.

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1280058--2/26/2010--BLACKBAUD_INC