Summary from My Understanding

So Game Freak has been known for a while now as having made wildly inefficient games and engines that the games run on. Everyone has run into at least one glitch or unintentionally bug during their playing of a Pokemon game. Every one knows of at least one baffling decision that Game Freak has previously made (think like not completing Mega Flygon, copy-pasting Battle Maison from XY into ORAS). There's like 40 different models for characters, like Lillie, in SM. For each one of those models, they had to manually recreate her each time. And she isn't the only example. This is obviously a crazy inefficient system when one Lillie model, maybe two (I don't know coding limitations), would work, take less effort, and take less time. Game Freak is a relatively smaller company and they have their coder's and programmer's manually making each one of these models. They're also making each one of the dynamaxed Pokemon their own models. There's like minimal differences too between the normal and dynamaxed models (most notably the swirling vortex above each Mon and some slight coloring differences). For Game Freak, with their current development system, it'd take an eternity to properly models all 809 mons, + alolans, + megas, + gender differences, + formes, + variations, etc. Multiply those all by 2 for the dynamaxed versions. And that's not even counting character models from the story.

It's essentially a disaster for Game Freak in their current iteration. Game Freak had four options at that point. They could:

1) Push the game back at the minimum a year (more likely 2-3)

2) Hire more staff

3) Change their current development system to be more efficient and run smoother

4) Cut stuff

Cutting stuff is the option they chose and it appears to be the one they've opted to proceed with, as evidenced by their official statements on policy change.

There are several options that Game Freak, or even Nintendo, could proceed with, given the medicore-at-best reception of Sword and Shield. I'll try to list SOME of them:

1) Worst-case scenario Game Freak continues in their current iteration and development system. Pokemon would be then begin to die, become severely cut down, or it would proceed like nothing happened. Most long-time fans of the series would probably not continue if this were the case.

2) They take a Niantic approach and release Pokemon in bunches as they get the models done. This seems somewhat unlikely as that would mean the games would be lasting for several years before getting a new version or generation. It also seems unlikely given their official statements.

3) Game Freak changes on their own. Again unlikely, given their official statements.

4) Nintendo responds to the negative-backlash by taking over and making new games or implementing a good development system with Game Freak.

5) etc.

I'd like to reiterate that this isn't a complete list of options or outcomes. There are so many directions the future of Pokemon could become. As of right now, it's definitely up in the air. The question is just "what's going to happen?"