Summary of INFORMATION SERVICES GROUP INC.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis in conjunction with our financial statements and related notes included elsewhere in this report. Except for historical information, the discussion in this report contains certain forward-looking statements that involve risks and uncertainties. We have based these forward-looking statements on our current expectations and assumptions about future events. In some cases, you can identify forward-looking statements by terminology, such as "may," "should," "could," "predict," "potential," "continue," "expect," "anticipate," "future," "intend," "plan," "believe," "estimate," "forecast" and similar expressions (or the negative of such expressions.) Forward-looking statements include statements concerning 2009 revenues growth rates and capital expenditures. Forward-looking statements are based on our beliefs as well as assumptions based on information currently available to us, including financial and operational information, the volatility of our stock price, and current competitive and economic conditions. As a result, these statements are subject to various risks and uncertainties. For a discussion of material risks and uncertainties that the Company faces, see the discussion in our 2008 Form 10-K titled "Risk Factors". Unless required by context, references to "we", "us", and "our" refer to the Company.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2009 AND
SEPTEMBER 30, 2008

Revenues

Revenues are generally derived from engagements priced on a time and materials basis, are recorded based on actual time worked and are recognized as the services are performed. Revenues related to materials (mainly out-of-pocket expenses such as airfare, lodging and meals) required during an engagement generally do not include a profit mark-up and can be charged and reimbursed discretely or as part of the overall fee structure. Invoices are issued to clients at least monthly. Revenues in the third quarter of 2009 were $32.5 million as compared to $41.1 million for the third quarter of 2008. The decrease of $8.6 million or 21% in the third quarter of 2009 was attributable principally to a 14% decrease in Americas revenues to $18.6 million and a 29% decrease in international revenues to $13.9 million. The decrease in revenues is primarily due to lower levels of sourcing activity in the U.S. and Europe as companies deal with the effects of the global economic downturn as well as unfavorable foreign currency translation impacts on reported U.S. results.

Operating Expenses

Direct costs were $17.0 million in the third quarter of 2009 as compared to $22.8 million in the third quarter of 2008. Direct costs consisted primarily of compensation costs for revenue-generating professionals, as well as fees paid to independent subcontractors and client-related reimbursable expenses. Compensation costs consist of a mix of fixed and variable salaries, annual bonuses, benefits and pension plan contributions. Bonus compensation is determined based on achievement against Company financial and individual targets, and is accrued monthly throughout the year based on management estimates of target achievement. Statutory and elective pension plans are offered to employees as appropriate. Direct costs also include employee taxes, health insurance, workers compensation and disability insurance. The decrease of $5.8 million or 26% was principally attributable to lower compensation due to a lower level of advisory staff, reduced provisions for performance based bonus programs, and lower levels of client reimbursable expenses. Foreign currency translation also reduced costs in the third quarter of 2009 compared with the same 2008 period.

A portion of compensation expenses for certain billable employees are allocated between direct costs and selling, general and administrative costs based on relative time spent between billable and non-billable activities.

Sales and marketing costs consist principally of compensation expense related to business development, proposal preparation and delivery, and negotiation of new client contracts. Costs also include travel expenses relating to the pursuit of sales opportunities, expenses for hosting periodic client conferences, public relations activities, participation in industry conferences, industry relations, website maintenance, and business intelligence activities. The Company maintains a dedicated global marketing function responsible for developing and managing sales campaigns, brand promotion, the TPI Index, and assembling proposals.

The Company maintains a comprehensive program for training and professional development. Related expenses include product training, updates on new service offerings or methodologies and development of project management and leadership skills. Also included in training and professional development are expenses associated with the development, enhancement and maintenance of our proprietary methodologies and tools and the systems that support them.

General and administrative expenses consist principally of executive management compensation, allocations of billable employee compensation related to general management activities, IT infrastructure, and costs for the finance, accounting, information technology and human resource functions. General and administrative costs also reflect the continued investment

associated with implementing and operating client and employee management systems. Because our billable personnel operate primarily on client premises, all occupancy expenses are recorded as general and administrative.

Selling and general and administrative ("SG&A") expenses of $10.5 million in the third quarter of 2009 versus $11.9 million in the third quarter of 2008 consist of sales and marketing costs, training and professional development programs, and general and administrative expenses for corporate staff and billable advisors. The $1.4 million or 12% decrease in SG&A expenses during the third quarter of 2009 compared with the same prior year period was principally attributable to reductions in fixed and variable compensation levels, lower spending for travel services and reduction of $0.6 million in accruals related to the Company's 2009 cost productivity programs primarily due to voluntary terminations. In addition, there was an increase in the number of projects than previously projected which resulted in the Company being able to retain the employees that were originally part of the cost productivity plan. Lower SG&A costs were also driven by lower levels of marketing, conferences, training and client development activity.

Depreciation and Amortization Expense

Depreciation and amortization expense in the third quarter of 2009 was $2.4 million compared with $2.6 million in the third quarter of 2008. This decrease of $0.2 million was primarily due to the reduction of amortization expense for intangible assets impaired as part of the Company's goodwill and intangible assets impairment testing conducted in 2008.

The Company amortizes its intangible assets (e.g. client relationships and databases) over their estimated useful lives. Goodwill related to acquisitions is not amortized but is subject to annual impairment testing.

Impairment of goodwill and intangible assets

The Company recorded a non-cash impairment charge of $6.8 million associated with indefinite-lived intangible assets as a result of an impairment test during the third quarter of 2009. The impairment primarily resulted from the sustained challenging macro-economic factors impacting industry conditions and actual results.

Other Income (Expense), Net

Other expense, net, for the third quarter of 2009 totaled $1.2 million compared to $1.3 million for the third quarter of 2008. The decrease of $0.1 million was primarily due to lower interest expense related to debt facilities for the period.

Income Tax Expense

The Company's effective tax rate varies from period to period based on the mix of earnings among the various state and foreign tax jurisdictions in which business is conducted and the level of non-deductible expenses incurred in any given period. The Company's effective tax rate for the three months ended September 30, 2009 was 33.2% compared to 42.5% for the three months ended September 30, 2008. The Company's operations resulted in a pre-tax loss of $5.4 million and a tax benefit of $1.8 million at the 33.2% effective tax rate for the quarter ended September 30, 2009.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND SEPTEMBER
30, 2008

Revenues

Revenues in the first nine months of 2009 were $98.3 million as compared to $137.4 million for the first nine months of 2008. The decrease of $39.1 million or 29% in the first nine months of 2009 was attributable principally to a 25% decrease in Americas revenues to $56.8 million and a 33% decrease in international revenues to $41.5 million. The decrease in revenues is primarily due to lower levels of sourcing activity, particularly in the U.S. and Europe, attributable to uncertainty and delayed decision making by clients resulting from the prolonged worldwide economic downturn. Declines in IT related sourcing activity and a slowdown in global business process outsourcing were primary contributors to this year-over-year decline. International results were also reduced significantly when expressed in U.S dollars as a result of a substantial weakening of the exchange rate for the Euro, British Pound and Australian dollar.

Operating Expenses

Direct costs were $49.4 million in the first nine months of 2009 compared to $76.8 million in the first nine months of 2008. The decrease of $27.4 million or 36% was principally attributable to lower compensation due to a lower level of advisory staff, reduced provisions for performance based bonus programs and lower levels of client reimbursable expenses. Foreign currency translation also reduced costs in the first nine months of 2009 compared with the same 2008 period.

SG&A expenses totaled $35.6 million in the first nine months of 2009 versus $39.5 million in the first nine months of 2008. This decrease of 10% in SG&A expenses during the first nine months of 2009 compared with the same prior year period was principally attributable to reductions in fixed and variable compensation levels, reduction of the vacation accrual, travel expenses, lower spending for outside professional services and decreases in training and client development activity offset by severance charges totaling $1.1 million and increases in computer related expenses and bad debt reserves.

Depreciation and Amortization Expense

Depreciation and amortization expense in the first nine months of 2009 was $7.2 million compared with $7.8 million in the first nine months of 2008. This decrease of $0.6 million was primarily due to the reduction of amortization expense for intangible assets impaired as part of the Company's goodwill and intangible assets impairment testing conducted in 2008.

Impairment of goodwill and intangible assets

Other Income (Expense), Net

Other expense, net, for the first nine months of 2009 totaled $3.5 million compared to $3.8 million for the first nine months of 2008. The decrease of $0.3 million was primarily the result of lower interest expense related to debt facilities partially offset by foreign currency related losses and lower interest income.

Income Tax Expense

The Company's effective tax rate for the nine months ended September 30, 2009 was 31.4% versus 41.5% for the nine months ended September 30, 2008. This decrease is primarily due to the impact of the impairment of the intangible assets recorded during the third quarter of 2009. The Company's operations resulted in a pre-tax loss of $4.3 million and a tax benefit of $1.4 million at the 31.4% effective tax rate for the nine months ended September 30, 2009.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

The Company's primary sources of liquidity are cash flows from operations, existing cash and cash equivalents and the Company's revolving credit facility. Operating assets and liabilities consist primarily of receivables from billed and unbilled services, accounts payable, accrued expenses, and accrued payroll and related benefits. The volume of billings and timing of collections and payments affect these account balances.

As of September 30, 2009, our cash and cash equivalents were $42.9 million, a net decrease of $18.2 million from December 31, 2008, which was primarily attributable to the following:

� payment of principal amounts related to the Company's term loan debt aggregating $17.2 million

� net cash outflows from operating activities totaled $1.3 million primarily due to $1.1 million of severance payments and $8.9 million for the payout of bonuses earned during 2008 offset by net cash inflows from operating activities; and

� capital expenditures for property, plant and equipment of $0.8 million

Capital Resources

On November 16, 2007, in connection with the Acquisition of TPI, International Consulting Acquisition Corp., (the "Borrower") a wholly-owned indirect subsidiary of the Company, entered into a senior secured credit facility comprised of a $95.0 million term loan facility and a $10.0 million revolving credit facility (collectively referred to as the "2007 Credit Agreement"). On November 16, 2007, the Borrower borrowed $95.0 million under the term loan facility to finance the purchase of TPI. As of September 30, 2009, the total principal outstanding under the term loan facility was $76.8 million. There were no borrowings under the revolving credit facility.

Under the 2007 Credit Agreement, we are required to hedge at least 40% of borrowings outstanding under the term loan facility. In February 2008, the Company purchased a three-year interest rate cap at 7% that hedges the LIBOR component of our borrowings under the term loan facility. The expense related to this interest rate cap was nominal.

On June 29, 2009, the Company made a voluntary principal prepayment of $12.0 million against its outstanding term loan balance of $93.8 million. In conjunction with this prepayment, our lenders consented to the following conditions: (1) agreement to execute the Company's UK tax planning strategy to reduce future potential cash taxes, (2) exclusion of the impact in the calculation of Earnings before Interest, Taxes, Depreciation, and Amortization ("EBITDA") of up to $5.0 million of restructuring charges relating to the Borrower's previously announced 2009 restructuring plan through December 31, 2009 and (3) exclusion of the impact in the calculation of EBITDA of establishing, if necessary, a reserve in respect of certain accounts receivable and work in progress due from General Motors Corporation for worked performed on or before June 1, 2009.

On September 11, 2009, our lenders agreed to amend the total leverage ratio (as defined) for the remaining life of the 2007 Credit Agreement to provide the company with greater financing flexibility in return for additional debt repayments. In line with the terms of the amended 2007 Credit Agreement, on September 30, 2009, the Company paid $5.0 million in principal reducing the outstanding term loan balance to $76.8 million. Additional mandatory principal payments of $5.0 million and $2.0 million are due on December 31, 2009 and March 31, 2010, respectively. The principal repayment was made from excess cash balances generated through the Company's normal business operations. The remaining mandatory term loan principal payment will be due on November 16, 2014, which is the maturity date for the term loan.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet financing arrangements or liabilities, guarantee contracts, retained or contingent interests in transferred assets or any obligation arising out of a material variable interest in an unconsolidated entity.

Recently Issued Accounting Pronouncements

See Note 3 to our condensed consolidated financial statements included elsewhere in this report.

Critical Accounting Policies and Accounting Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements. We prepare these financial statements in conformity with accounting principles generally accepted in the United States. As such, we are required to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. We base our estimates on historical experience, available information and various other assumptions we believe to be reasonable under the circumstances. On an ongoing basis, we evaluate our estimates; however, actual results may differ from these estimates under different assumptions or conditions. There have been no material changes or developments in our evaluation of the accounting estimates and the underlying assumptions or methodologies as disclosed in our fiscal 2008 Form 10-K, Critical Accounting Policies and Estimates.