Earlier quoted context omitted.
The removal of XMPP interoperability was the moment I realised "Don't Be Evil" was just another marketing puff, and not actually a statement of values. But I think the termination of Google Wave (which was also federated and built with XMPP) was the real moment Google gave up on team communications.
Yeah, it didn't make any sense. It also didn't make any sense they dropped XMPP in favour of Hangouts. XMPP has its share of problems, but it's designed as an extensible protocol. Google's Jingle addon to XMPP was actually quite nice, although it took quite some time to get polished. Once they had it right and it was gaining some traction, they drop it in favour of a proprietary solution...
It makes perfect sense. Forcing out competitors (XMPP) with leverage from dominance in a neighboring market (gmail, which was the common interface for GTalk) is a textbook example of monopolization.
If we lived in a world that actually cared about the rule of law, Google would be charged for violating the Sherman Antitrust Act (and/or related antitrust acts).