Google have never been in the NTP business - there's no reason for them to have worked towards a concensus on this. But when a company their size makes their approach publicly available to all, it starts to pave the way for a consistent standard for everyone.
Another example: Suppose that a portion of an industrial monitoring system processes remote sensor data in a cloud datacenter with smeared time, while the sensor nodes keep strict UTC time. Your SCADA system had better not have any hard-baked assumptions like "messages cannot come from the future", or you're going to have a hard time, too.
Lets say that a company's internal NTC servers include several sources for reliability and redundancy. Much like Google DNS, perhaps one of the sources is Google NTP, while another is derived from the NTP pool. How do you expect the NTP daemon to behave in this situation? It will certainly be able to observe a 500ms difference between its source timeservers.
I can't think of anyone who cares that much about timekeeping who isn't running their own internal NTP infrastructure.
Google's Spanner requires accurate global time, so they deployed GPS and atomic clocks. Same for CDMA. There are some applications for high-resolution time (eg finance), so protocols like PTP exist.
A smeared NTP source in an otherwise normal list of time sources doesn't seem like that big of a deal either - eventually the daemon is just going to mark it as a falseticker and life goes on.
If you run it on a VM it's IMHO your responsibility to make sure your time sensitive database nodes have shared time.
Same for the second example, interesting point for SaaS scenario, although it seems like that could break through normal deviations already.
EDIT: ok, the blog post actually mentions "local clocks in sync with VM instances running on Google Compute Engine", my bad. Not sure what to think about that. In comparison, Amazon recommends running NTP on your VMs and their Linux AMIs come with pool.ntp.org configured as default. </edit>
Third: It's going to figure out some solution (if Google is only one source it's probably going to drop it as faulty), but you probably should not have added a time source that's officially documented to not strictly follow standards. It's not like Google offered a NTP service for years and now suddenly switched how it works.
I guess I underestimate the amount of trust people put into random time sources: practice is probably messier than theory.
