Slowing revenue growth, inflation and operational complexity driving renewed cost pressures Gen AI adoption and operating model transformation key to reversing the trend
The Hackett Group, Inc. (NASDAQ: HCKT), a leading Gen AI consulting and enterprise digital transformation firm, today announced the release of its 2025 European SG&A Cost Study and Scorecard, revealing that median selling, general and administrative (SG&A) costs among Europe's 1,000 largest public companies rose for the second consecutive year, climbing by 6% to 11.5% of revenue the highest level since 2020.
The study found that 63% of companies saw SG&A costs increase as a share of revenue, and 78% failed to keep costs aligned with inflation, despite EU inflation falling to 2.5%. At the same time, only 18.1% of companies reduced SG&A costs up slightly from 16.1% last year but far below 2022 (25.8%).
While European companies continue to outperform their North American peers whose median SG&A cost ratio stands at 14.3% the region's trajectory is worsening. "The data tells a clear story: traditional cost-cutting levers are no longer enough," said Thomas Kellaway, principal, Benchmarking, The Hackett Group. "Leaders must pivot from short-term tactics to long-term, AI-driven strategies to shape modern service delivery models if they want to achieve sustainable cost leadership."
Digital World Class performers show the path forward
The Hackett Group's analysis highlights a growing gap between top-quartile and median performers. First-quartile companies operate with SG&A costs roughly six percentage points lower than median performers, underscoring the value of Digital World Class capabilities defined by excellence in both efficiency and business value.
For a €10 billion company, reaching Digital World Class performance across SG&A functions could yield an annual cost advantage of €246 million. Within finance, human resources (HR), information technology (IT) and procurement alone, potential annual savings reach €76 million. For example, Digital World Class finance organizations operate at up to 47% lower cost while delivering better outcomes such as more reliable forecasting and higher stakeholder satisfaction.
AI and Gen AI reshaping the cost-leadership playbook
The report shows that Digital World Class technology organizations dedicate 34% of IT spend to artificial intelligence (AI), automation and emerging tech three times more than peers. Companies successfully using AI are seeing breakthrough performance benefits, including significant SG&A cost savings.
"AI and agentic technologies are now central to cost leadership," said Kyle McNabb, principal and Gen AI Executive Advisory program leader, The Hackett Group. "Leaders are investing to move from pilots to delivering value at scale building their agentic enterprise where AI assists, augments and even acts autonomously to drive measurable business impact."
Key imperatives for leaders
To achieve sustainable SG&A efficiency, The Hackett Group recommends that companies:
- Embrace their agentic enterprise redesign processes, structures and governance to enable AI-assisted, autonomous operations.
- Establish an AI center of innovation (COI) use it as the strategic hub for ideation, evaluation and delivery of fundamental changes required for the agentic enterprise.
- Simplify processes and standardize systems reduce complexity that inflates cost and limits scalability.
- Target change using empirical data benchmark performance to establish a baseline and set credible targets.
- Elevate analytical capabilities invest in advanced analytics and master data management to enhance insight-driven decisions.
- Strengthen strategic partnerships ensure you're leveraging third-party providers and outsourcers effectively and are fully leveraging vendor technologies to accelerate transformation.
"Across Europe, business leaders recognize that the next wave of sustainable cost improvement depends on mastering Gen AI through the development of a digital service delivery model," said David Ketchin, managing director for Europe, The Hackett Group. "By combining fact-based business benchmarking with our unique AI opportunity insights and agentic enterprise frameworks tailored to each organization's operating environment, we're helping clients move beyond cost containment toward true performance breakthroughs."
The 2025 European SG&A Cost Study and Scorecard analyzes the publicly available financial statements of the 1,000 largest nonfinancial services public companies headquartered in Europe for tax year 2024. Download the full results and insights from the 2025 European SG&A Cost Study and Scorecard for free with registration.
About The Hackett Group
The Hackett Group, Inc. (NASDAQ: HCKT) is a Gen AI strategic consulting and executive advisory firm that enables Digital World Class performance. Using AI XPLR and ZBrain our ideation through implementation platforms our experienced professionals help organizations realize the power of Gen AI and achieve quantifiable, breakthrough results, allowing us to be key architects of their Gen AI journey.
Our expertise is grounded in unparalleled best practices insights from benchmarking the world's leading businesses including 97% of the Dow Jones Industrials, 90% of the Fortune 100, 70% of the DAX 40 and 51% of the FTSE 100. Visit us at www.thehackettgroup.com.
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