You really can't blame Square Enix, it's the nature of the medium now that it's such a calamity to make a game that actually looks good and doesn't have many obvious imperfections. It's a highly risky thing and like Mirage said, they need to start now if they want to do it.

Also, it does seem from the article that maybe this is an eidos engine.

Also, this could potentially be a very lucrative proposition. Looking at how successful and widely adopted the Unreal Engine 3 was at the beginning of this generation, it's up for grabs whoever makes the industry standard for the beginning of the next generation. Crytek seems confident that they've already done it but they need to get out there and try to make it happen (I personally know people at IllFonic, the first company licensing CryEngine 3 for their game Nexuisz and apparently Crytek is very hands on in sending people to come and help you with the development).

If Square Enix actually made that engine, it would be a massively beneficial thing for the company. Also their developers wouldn't have to be sitting on their asses waiting for it to come and then being rushed because you've taken so long this generation to release something.