If true, this seems like a real wasted opportunity - even if that is the future we are getting to in several years, why not release a ready product that people would find useful in the meantime (and would help people arrive at that vision)?
edit: here is the excerpt: http://allthingsd.com/20110425/how-google-killed-gdrive-and-...
He went to Bradley Horowitz, the executive in charge of the project, and said, “I don’t think we need GDrive anymore.” Horowitz asked why not. “Files are so 1990,” said Pichai. “I don’t think we need files anymore.”
Although there is some truth in that, personally I don't think locking data in cloud-based silos is any better than locking it locally in proprietary data formats. If anything, it is a further step backward.
For example: Does anyone know the native format of Google Documents? Can you import/export it losslessly? I don't think so.
Apparently not: my students occasionally use Google Docs to get papers from their computers to printers in the library (or vice-versa), and the formatting of their papers constantly gets fucked up. When I see weirdly formatted papers, the students almost always blame Google Docs. Granted, I don't know if that's because the students don't know what they're doing or if Google Docs is hard or confusing to use, but still.
We build a Google Docs to InDesign linking product (http://emsoftware.com/products/docsflow/), and there's lossage/lack-of-direct-mapping when converting both from Word to Docs, and then from Docs to anything else (HTML, ODF, etc.).