According to the Ars Technica article on Hangouts, we can expect Google to drop support for XMPP federation.
We should apparently be happy that Google is not dropping XMPP client-to-server connections.
The instant messaging space is apparently turning into a duopoly of Microsoft's Skype and Google's Hangouts with everyone else shoved to the sidelines. I'm not counting Facebook Chat as a serious alternative, and iMessage is not intended as an instant messaging service.
I hopefully don't have to point out how much this frustrates and annoys me. Google is turning out to be worse than Microsoft ever was: they're actively backpedaling on their past promises. They're backstabbing the "open". Scratch that — they're throwing a stake through open's heart, ripping it in pieces, then gorging on its still beating remains. Instead of reading RSS through Reader, we're supposed to read custom posts via the closed and locked down Google+. They are killing iGoogle. They're basically killing the open web and open Internet, while at the same time paying lip service to open.
Android, which is just-enough-Linux-but-not-really. Rich authorship markup, which requires two-way linking to Google+ instead of using the semantic web techniques.
I'll keep on looking for ways to back out of Google ecosystem as much as possible. What's next — Gmail that can't send emails out?