There's a ton of aspects to consider when it comes to gracefully dealing with failure.
A lot of folks don't understand that it's difficult, legally, for a company to "give away" anything. Shareholder value and all that. So that's one factor that keeps what seems what ought to be the 'right thing to do' from happening. But it sure seems like it'd have been MUCH more cost-effective to buy those folks out ahead of time, rather than just shutting them down. To say nothing of the idea of just letting it limp along until an actual viable alternative existed. Nope, instead they actively alienated existing customers and brought a slew of negative press down on the heads of a whole range of innovation. Gee, thanks Google...
It's also hard to grasp that each 'operating unit' within an organization has to justify it's existence. Be this just a product or a whole division. This falls on the personnel, and quite often their own personal self-interest gets in the way of what the customers/market think is the 'right thing'. As in, lots of underlings likely know what a mess it'll be but don't want to risk their jobs to tackle the problems.
Google's mistakes here are both a blessing and a curse. For one it raises the public's awareness regarding automation. Unfortunately, not in a good way with regard to utilizing Internet-integrated features (aka, 'the cloud').
An in-depth post mortem on just how they came to this point would be a fascinating read. But like many failed tech initiatives we'll likely never know the 'whole story'.
