The Hackett Group recently published its study on the overheads of European companies: in 2025, selling, general and administrative (SG&A) costs grew by an average of 6 percent year-on-year to 11.5 percent of revenue generated for 1,000 European companies surveyed ̶̶ a high since 2020.

According to the Hackett study, 63% of companies see rising SG&A costs as detrimental to revenue. 78% were unable to adjust costs in line with inflation, even though the European inflation rate fell to 2.5%. And only 18% of companies reduced overheads in the past financial year – 26% in 2022.

It is true that the European companies’ SG&A values are more favorable than their North American competitors. “But the trend is still negative, even in Europe,” predicts Georg Bach, Hackett Managing Director for Central Europe. “Traditional approaches to cost reduction are no longer sufficient ̶̶ executives must consistently focus on long-term, AI-supported SG&A digitization strategies in order to sustainably improve the scaling of SG&A costs”

Digital World Class® Companies show how it’s done

The Hackett analysis, which is available free of charge via the link 2025 European SG&A Cost Study and Scorecard also shows that Digital World Class companies have up to six percent lower SG&A costs than average companies due to their performance and generate more “value” for the business. This means that a company with a turnover of 10 billion euros can save up to 250 million euros per year.

According to the study, 34 percent of IT investments by Digital World Class companies flow into artificial intelligence, innovative automation technologies and E2E-driven optimization of the target operating model – three times more than the competitors in the peer group.

Georg Bach: “Agentic AI on an E2E process basis with company-wide standardized process and data governance (including the establishment of “Centers of Excellence” and the introduction of global process owners) are key factors in establishing improved scaling of SG&A costs in response to persistently volatile conditions.”

Important steps to reduce costs

For sustainable SG&A cost savings, the Hackett study recommends, among other things, that companies

1. The establishment of an AI Center of Innovation (CoI) to generate new innovative ideas and developments based on Agentic AI.
2. simplify process and data governance and standardize it across companies.
3. Investments in advanced analytics and master data management to improve and accelerate decision-making processes.
4. To promote and strengthen strategic partnerships and to develop and utilize transformation technologies in a targeted manner with third-party providers and outsourcing.

“Business leaders across Europe have clearly recognized that sustainable cost savings can only be achieved with increased use of agentic AI and the creation of digital service models,” concludes Georg Bach. “This is the only way to achieve significant increases in operational process excellence and business value at the same time.”

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.