Visa U.S.A. Inc. plans to cut 200 jobs during its current fiscal year at Inovant LLC, or 10% of the technology unit’s work force, a spokesman confirmed.
The layoffs are not related to plans by the parent company Visa International to go public, the spokesman, Paul Cohen, said last week. Rather, they are part of a work-force reduction plan unveiled in 2005, he said. The association, whose fiscal year began Oct. 1, wants to rely less on in-house contractors and do more outsourcing.
“As a participant in a very competitive market, we continually review our operations to ensure that we are as efficient, flexible, and competitive as possible,” Mr. Cohen wrote in an e-mail. The East Bay Business Times reported the layoff plan last week.
Under a corporate restructuring plan announced last month, Visa International and five of the six regional Visa associations are to be merged into a new company to be called Visa Inc. that would hold an initial public offering by early 2008. Visa Europe would retain its autonomy.
Despite Mr. Cohen’s explanation, industry observers said the layoff plan signals a move at Visa to shake off the not-for-profit culture and get set for Wall Street expectations and market metrics.
“I’ve got to believe it has to be in some ways related to them preparing for the IPO,” said Dan Schatt, a senior analyst in San Francisco for the Boston market research firm Celent LLC.
Information technology workers are usually the early casualties when companies are in cost-saving mode. Silicon Valley — near San Francisco, where Visa U.S.A. is based, and Foster City, where Visa International is based — suffered the fallout of the dot-com boom earlier in the decade when many jobs were outsourced overseas.
“Just as Visa has been late to corporate restructuring, it’s getting the tail end of outsourcing.” Mr. Schatt said. “Visa is going through what the rest of the Valley went through a few years ago, and they have to think about it now, because they were shielded from it for some time.”
Gwenn Bezard, a research director at Aite Group LLC in Boston, said that as Visa has revamped its technology over the years, it has had less of a need for IT workers. Workers who are not core to the company’s technology as it consolidates may be especially vulnerable, he said.
In late September, Inovant completed a major upgrade to its authorization system and opened a processing center to handle authorization tasks.
Mr. Schatt said Visa, as a not-for-profit company, did not worry much about efficiency and was not a lean company.
Randall M. Chesler, a former executive vice president at Visa who is currently the president of consumer finance at CIT Group Inc., said in an interview last week that Visa felt it had to become less bureaucratic.
“I think they can no longer afford to be triple-redundant and beyond market practices,” Mr. Chesler said. “They can’t afford the luxury of being gold-plated in their whole approach to things.”
Mr. Bezard said restructuring could lead to more layoffs of administrative employees.
Asked if more layoffs were in the works at Visa, Mr. Cohen said, “You have a lot of synergies when you create a global, public company, so it’s too early to say what the end result will be.”
MasterCard Inc., which announced last fall that it would go public and executed its IPO in May, would not say if it has had significant layoffs.
But the Purchase, N.Y., company’s third-quarter filing shows that personnel costs rose almost 6% compared with last year’s third quarter. The company said it hired additional staff to improve relations with merchants.
