The Villa boss, whose side have the same ambitions as City in pursuing a top four Premier League finish this season, believes that Hughes should have been given more time in the Eastlands hot-seat.
"I suppose it is a microcosm of our game," O'Neill said.
"Manchester City have lost fewer games than anyone else in the league, they are in the semi-finals of the Carling Cup and seemingly this decision was taken three or four weeks ago.
"As a manager, it doesn't inspire you with great confidence. Unfortunately, it happens in the game and that's the nature of it. It's a sad indictment. It's crazy.
"In any other industry, you would be given the time to do the job, you really would. But football is not like any other industry and more so than ever before.
"I must admit that very little surprises you but I was half-surprised about this, due to Hughes's record and the fact he has lost fewer games than anyone else.
"Mark Hughes will be disappointed not to have been given the chance to see the job through. Good, bad or indifferent, you have a situation where you have been given a job, handed some money but because you have been given this money it doesn't follow that you go out and win your next game 6-0. That just doesn't happen. You need a bit of time for it all to gel."