This is a big story. I'm both an engineer and a manager (to which engineers will say "management!" and managers will say "developer!"), and I haven't seen this pendulum swing back and forth so much as be ripped in half and pulled in opposite directions. Google's obviously got very smart folks in both engineering and management, so it's going to be very interesting to see how this is handled.
I can't imagine a Microsoft, Sun, Oracle, etc going through this exercise, so I'm seriously rooting for Google. It'd be lovely for this change to produce some real knowledge on how to run a modern, big, high-speed tech company without getting trapped in the argument over engineering-vs-management.