In terms of technology, Square is years behind. Give them five years and they bring us the engine that powered FFXIII which was utterly underwhelming to me. Granted part of the problem was the terrible art style and half assed textures, but it was pretty light on graphical effects that are pretty standard these days.

Meanwhile companies like Epic and id completely obliterate everything coming out of Japan as far as technology is concerned. Mind you I think that trying to make an engine in house for next-gen titles is quickly becoming too expensive to be worth it. Sadly, Square's one attempt at using a licensed engine was a failure as well, making me wonder how much of it had to do with the engine or their not knowing how to modify it.

As far as actual creativity in their games, they really don't have anyone aside from Nomura anymore willing to take charge and at least have some grand vision of where to take a title. Many of their big names who have been driving forces behind a lot of their best titles are gone, and the end result is that you get games that greatly suffered from a lack of strong direction and a cohesive idea for the development teams to get behind. This is very obvious in FFXIII even ignoring the fact that they admitted as much, and from what little I know of FFXIV it seems like it suffered from similar issues as well.

This isn't to say that other developers don't suffer from similar problems, but the better developers out there these days don't have these problems, and it shows.