Fred Vogelstein, writing for The Atlantic, on what happened with the Android team after the iPhone was unveiled:
Within weeks the Android team had completely reconfigured its objectives. A phone with a touchscreen, code-named Dream, that had been in the early stages of development, became the focus. Its launch was pushed out a year until fall 2008. Engineers started drilling into it all the things the iPhone didn't do to differentiate their phone when launch day did occur.
Me, a few years ago:
Now, does this mean that the iPhone had zero influence on Android's early development? Of course not. Like the iPhone itself was standing on the shoulders of giants (iPhone to PalmOS: hi daddy!), Android stood on the shoulders of giants as well. However, unlike what has already become an accepted truth for some, the infamous photograph of a prototype Android device was not the prototype Android device. In fact, Google was working on touch screen devices alongside that infamous BlackBerry-like device, and the evidence for that is out there, for everyone to see.
Vogelstein's entire article - which is actually adapted from a chapter of a book - is a bit contradictory in nature. It claims, several times, that the Android team had to start over after the release of the iPhone, but at the same time, it states that a full touch phone was already in development.
So, just to reiterate: touchscreen devices had always been part of Android, even during its initial stages at Google. Several different form factors were in development, but after the release of the iPhone, it made little sense to continue to focus on the BlackBerry-like device. Some make it seem as if Vogelstein's article is some sort of massive eye-opener completely rebutting this point, but it seems they may have missed its second-to-last paragraph.