Helping Hollywood

As the entertainment and media industries deal with dual challenges of changing over to digital formats while also keeping an eye on the bottom line, President and CEO Richard Gallagher wants Xytech Systems to be there to provide assistance. A San Fernando Valley native and a member of two national champion Ultimate Frisbee teams while at the University of California at Santa Barbara, Gallagher hesitates to give exact names of the company’s clients but counts among them the major studios, television networks and post-production companies. Burbank-based Xytech founded in 1988 develops, implements and services generic workplace management systems with specific applications tailored to media- and entertainment-type companies. One Burbank client replaced 14 different workplace management systems with a single one provided by Xytech. Xytech has cornered a market with its software streamlining every day functions of entertainment-related companies such as scheduling for employees and equipment; accounting; timecard management; and allowing for better tracking of physical and digital assets. It is the library system, Gallagher said, that sets Xytech’s software apart and makes it valuable to customers. Gallagher said there is a trend in the information technology departments to consolidate different systems into one for the purposes of integration. “A lot of our bigger deals are based on taking multiple departments and putting them on one central system,” Gallagher said. Question: Tell us something about the background of founding Xytech? Answer: My father worked at one of the larger post-production facilities in town and they needed a system. I sold them the hardware, basically wrote the software on my own and gave them a free copy. It took off from there. It had another implementation for The Walt Disney Co. in Florida. I sold them that version and the accounting package and I just built it from there. Q: What are some of the applications that Xytech software is used for? A: There are over 30. Some of the key modules include scheduling for people and equipment. A lot of our companies have very expensive, multi-million dollar pieces of equipment so it’s very important to optimize the time and usage. We have a job management system and keep tracks of jobs and work orders and what people are supposed to do during the day. The thing that tailors this to media and entertainment is our library system. It keeps track of all the physical and digital assets. Many of the major studios use our software to track all their inventory. They may add a thousand elements into our library system. We have a full accounting system that we’ve written. There’s a timecard application that keeps track of everybody’s time. We like to pitch our system as end-to-end workflow. Q: Were there any specific challenges you faced in starting up Xytech? A: There were a lot of challenges. I’m from a software background so I didn’t really know the (media and entertainment) industry. That’ wasn’t that big of a problem because I had written software for 14 different companies before that. The challenges were starting a company from scratch without any money; starting it in my garage and hiring one person and then two people. Maybe a year later you can get your first copier and finally move into an office and slowly grow it. I worked at home for the first seven years. Once the company got to a certain size and I had several people working for me it was more important going to an office. Q: How did you know there was this niche that needed to be filled? A: It was by chance. I hear things from time to time and this one turned out to be a real opportunity. We’re in a relatively small market. We don’t necessarily have any competitors on the higher end. Our software has 50 man years worth of development time put into it. For somebody else to get into our space wouldn’t make sense. It’s not that big of a market that we can’t cover it. We’re starting to move up the food chain and competing against large companies successfully because our software is geared toward the type of business that our type of customers are looking for. Q: What is Xytech’s role as the industry moves toward more use of digital formats for its content? A: There is a transition in our industry moving from physical assets to digital assets from tape to digital and that provides a lot of opportunities. A lot of companies are going to go by the way side and there are going to be new companies that thrive. I wanted to make sure we were one of the companies that thrive based on the new opportunities. There are a lot of digital asset management systems out there, they just haven’t caught on. I met with probably 15 major customers and asked why they weren’t purchasing these systems. The answer was pretty much the same among everybody I talked to. They said they were slick systems but that they didn’t handle the business need. And business need involves physical assets. We have the number one physical asset library system in the world. We have to make sure when it comes to digital assets we provide the same type of functionality. Talking to the clients, one of the other issues was the digital asset management systems weren’t designed for media and entertainment. So basically what I did was design a new concept of how to automate workflow. Our customers were saying the workflow for digital assets and physical assets are the same thing. I came up with a new module available today called digital ordering. The order taker enters in the order as they do today and fires off commands to different servers and different digital asset management systems to automatically deliver it to another system, to check it in, to check it out. With this new piece of software you can automate that process. That’s what a lot of people are interested in and it will be interesting to see how that product takes off. Q: How important is it to the growth of Xytech to stay ahead of the curve technology-wise and be aware of coming trends? A: It’s very important to be aware and it is important to be in the latest technology but it’s also impossible to stay with all the changes. We have 50 man years worth of development in our software. To move to a new technology is not an easy task. It takes years and years and millions of dollars. The most important thing is your software that does the job. We’re in the process of updating our technology and we should have something out by the middle of next year. Q: Does Xytech serve clients outside the media and entertainment industries? A: We have a few unique implementations. We have a Top 5 corporation, a public company Boeing that has 98 departments running on our software. They were our second implementation and it started in their video department. It just sort of grew and once it was in the video department it went into photography and from photography it went into writers and editors and then it went to the graphics people. Every year we kept hearing they were going replace our system. Now I think they are going keep it for quite a while. Q: Where do you see the company going in the next three to five years? A: The company has a lot of potential. It’s really the digital asset management system and how that takes off. Our software, fortunately, is very sticky. Which means it is very expensive to replace and time consuming. We want to keep our customers and they want to keep us. It adds to the value of the company. When new technologies come across for our customers as long as we stay on top of it and provide excellent solutions to that, we’re growing with our customers. There’s enough business with our existing customers to really grow the company, to triple or quadruple the size we are today. Q: Why does it make business sense for your customers to use your software? A: It really organizes them. That’s a big part of it. Without our system they have no idea what things cost. Certainly they aren’t billing accurately without our system. There’s a lot of return on investment we find with our system on the cost saving side and on the billing side. Q: Considering how cost-conscious the studios are these days it must be very valuable to them. A: Sure. With digital assets you can automate a lot of these processes. From the order you can automatically put it into the right format and send it out without making a tape and doing a lot of the manual processes there are today. Video on demand, ringtones, some of the other technologies you can automatically do things without manual labor. I think it’s going to save some costs there. Q: Are there any skills you learned playing Ultimate Frisbee that translate into the business world? A: I see that people have in any competition two personalities. They have their nice guy personality when you’re talking to them and their personality when the pressure is on. Some people can’t handle it and they are unpleasant to deal with. I think that relates a little bit to your business skills and personal life. Pressure certainly gets on in business and it’s how you handle that. I try to surround myself with people that are good under pressure and can handle those situations. I’d like to say that if you can throw a Frisbee better you’d be a better salesperson but I haven’t found that to be true. Name: Richard Gallagher Position: President / CEO Age: 47 Birthplace: Santa Monica Education: BS Computer Science at University of California at Santa Barbara (UCSB) Personal: Divorced, 1 child in college at University of California at Irvine, she’s a senior. Career Turning Point: Taking the risk of building a medical billing package for doctors and starting Medical Digital Technologies, Inc.