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CIO interview: Michael Moesgaard, Dong Energy

Dong Energy’s IT head talks about the challenges of working for an energy company going through a business transformation

Michael Moesgaard thought twice before he joined Danish energy company Dong to become CIO in 2004.

The company’s small size made him hesitate – until he was told about its growth plans.

“At that time, Dong was a smaller, natural gas-based, national company,” says Moesgaard. “My concern was that I might be bored working at a smaller company, but the CFO said, ‘don’t worry, we have big plans for the company’. And half a year later, we acquired the Dutch company Intergas.”

Soon after that, Dong was part of a merger of six Danish electrical utility companies, creating Dong Energy, the country’s biggest company in the sector.

“It is a very interesting and challenging job for a CIO to handle a merger like that, since nearly half of mergers fail to some degree,” says Moesgaard. “Between 2006 and 2008, we built the new Dong Energy company, forming IT, new business units and new strategies. It was a very transformative time.”

In 2009, Dong Energy started looking outside of Denmark and Norway, and expanded into Germany, the Netherlands and the UK. “We had not even finished all the challenges of the merger before we started to build new IT systems and applications to support the new activities abroad,” he says.

Dong Energy tried out different business opportunities, and in 2012 the company decided to focus mostly on offshore wind, oil and gas, says Moesgaard. “That meant we disposed of some other business activities, like electric vehicles and onshore wind,” he adds. “All of this was really interesting while in the midst of it, but it is history now.

“We do not see ourselves as a merged company today. The most interesting thing now is that we are a growth company, and that we are a world leader in wind power, optimising new ways of operating wind turbines offshore.”

New regulations have opened Dong Energy’s B2B and B2C businesses to competition, which Moesgaard sees as another interesting challenge. “We have to streamline to meet the competition,” he says. “IT-wise, we have two choices: either we have to get rid of the legacy billing and customer systems, or we have to make them leaner to cut costs.

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“We might be able to use the platforms in new ways, combining new systems with the legacy systems. We have not settled on this yet – it is not a simple task to change a portfolio of cumbersome legacy systems with lots of obsolete functionality.”

Yet another challenge to Moesgaard is Dong Energy’s diversity. “On one side we work with power plants, where we have legacy systems,” he says. “And then we have totally different IT systems for our oil and gas exploration and production, which is very IT infrastructure-dependent.

“Then we have our energy trading systems, where we are like a commodity bank, with lots of people from the finance sector.”

In 16 months’ time, Dong Energy plans to go public, which requires some preparation by Moesgaard. “We in IT have to make sure we are not a stumbling block – we have to support the company,” he says. “For example, we are making big investments in oilfields in the North Sea, and they are very dependent on IT. Here we have to make sure we are on top of the schedule.

“And we are quadrupling our business in wind power by 2020, which means we have to make sure we have IT capacity in place to support that.”

Moesgaard also expects requirements for transparency and security to increase, which places new demands on IT. “And on top of these different challenges, we have to be clean, mean and cost-effective,” he says. “We have to spend our money wisely, so we are crafting a programme now to make sure we are in good shape when we enter the stock market.”

We would like to outsource a little more, but we have been disappointed after issuing tenders – the market is not mature enough yet
Michael Moesgaard, Dong Energy

Dong Energy is growing quickly, and Moesgaard thinks it is easier to manage an IT organisation in that scenario rather than when cutbacks are necessary.

The IT department comprises about 550 people, 400 of them located in Denmark, 70 in Malaysia, 65 in Poland and the rest in the Netherlands, Norway, the UK and Germany.

“We do not have that much outsourced,” says Moesgaard. “We could have outsourced 135 people abroad, but we choose not to do it because they are supporting many of our projects, and we want IT people to link closely to the business.”

Some parts of Dong Energy’s datacentres are outsourced, likewise with application management in the UK and the Netherlands. “Our strategy here is multi-sourcing,” says Moesgaard. “We have to make sure we are in control, and that we have the skills to challenge the suppliers.

“We would like to outsource a little more, but we have been disappointed after issuing tenders – the market is not mature enough yet. We have also cancelled a few outsourcing contracts.”

Development and operations receive almost equal parts of the company’s IT budget. “We are big on development, but we try not to develop home-grown systems,” he says. “We use mostly standard systems and our employees customise them, building point solutions where they lack the functionality we need.”

In view of the company’s upcoming public offering, Moesgaard cannot make any statements about the future. “But what I can say is that Dong Energy is a changing company,” he says. “Most of our investments are made outside of Denmark. We have established a new office for wind power in the US, so it will be interesting to see what Dong Energy will look like in the future.

“IT wise, the interesting challenge is how we as a traditional IT organisation can reduce costs, streamline operations, clean up legacy systems and be innovative and build solutions quickly, like small companies do.”

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