What I haven't seen discussed is the effects of this decision on Google Apps users, in other words, (paying!) business users. With Google shuttering XMPP federation, you instantly lose the ability to communicate outside your organization (unless your customers/partners are also using google). As federated XMPP is much more heavily used in the business world, this drastically alters the value proposition of using Google Apps since you lose the very interoperability that used to be a selling point.
I'd love to see Google answer that particular question. All "enterprise IM" solutions out there are built on (federated!) XMPP. Even Microsoft's.
This isn't a theoretical question -- My last two employers used federated XMPP to communicate, both internally and with external clients/vendors.