Disclaimer: I’ve been making multiplayer and massively-multiplayer games for the better part of two decades, so while I don’t have an inside track with CIG, I can maybe provide some insights here. Of course, anything referring to what CIG may be doing is speculation based on my own, similar experiences.
This is an interesting question. As someone else said, it’s not a hardware problem, as there are servers in existence right now that are more powerful than CIG will ever need. In truth, if they did need that level of hardware the game would be cost-prohibitive to run because of the actual dollar cost of running the game on that hardware for an extended period of time.
With any always-on persistent-world game, server costs are a substantial part of ongoing development costs, so it’s important that the developer optimize the game so it can run on the least expensive server hardware possible.
If your question is whether or not the software architecture exists to do what they want, the answer is “in theory, yes, in practice, no.”
SpatialOS is attempting to solve the very same problem set, but the issue is that as more servers need to communicate with each other about what their clients are doing, the number of messages that must be sent, prioritized, and executed increases exponentially along not one, but two axes: more players and more servers. This results in hard upper limits on the total number of players in any one area, and the game must be designed with this in mind to avoid these limits being reached.
“Server” in this case refers to the software that runs the game for players to connect to as opposed to the hardware that runs that software. With games, a hardware server typically runs multiple instances of the server software for players to connect. Hardware servers are designed to do just that.
The more interesting side of this conundrum is whether or not this kind of “perfect connectivity” is even necessary for a game like SC. Sure, it’s a great technical North Star, but the fact remains that more people does not mean better gameplay. In fact, it often means degraded client performance and a feeling of insignificance for players, which can negatively affect their engagement.
With regards to client performance specifically, many online games can support more connections than they actually allow because the server communication is less of an issue than the client performance in situations where large groups of players can be in the same local area. Guild Wars 2, ESO, and New World all limit connectivity based on client performance, not server performance.
On the design side, the more people that are in an area increases the spectacle of the gameplay but it also decreases something important for player engagement: perceived impact. In general, players are egotistical and like to feel impactful. The larger the size of a potential group interaction, the less appealing it is to most people. Of course, there are large groups of people who like running 50-strong as a well-oiled machine, but for the most part they are in the extreme minority when compared to “total people who will play a game.”
Additionally, if you allow large groups of players to work together, this also means building some kind of content for them to do, which means either a large amount of content work (such as a WoW raid), complex open world PvP systems (such as Eve Online), or both.
At any rate, it’s all “doable” but what remains to be seen is whether or not CIG can do it. This kind of server tech has existed in some form for some time (even WoW uses similar tech now), and the fact that they have had an indeterminate estimate for “Server Meshing” for literal years is a sign that either they’re lying about it being worked on or they haven’t been able to hire someone with the knowledge to do it so they’re having to figure it out themselves.
The latter is the most likely case, especially if you consider that the poor soul(s) working on it are probably also the people having to fix existing major issues with whatever awful server tech they’re running right now. CIG is basically a meme among game developers these days, so I imagine it’s hard for them to hire actually competent people.
Edit: I should also note that I’m specifically referring to client-server connections for “main gameplay” actions like moving and shooting. It’s worth noting that MMO-type games often have multiple server “types” that run different tertiary services, such as logins, friends lists, chat, or a player driven market (or in SC’s case Quantum).