Not ony is this a single point of failure but it's one they've no control over whatsoever. Same goes for Google/Youtube etc. It's as risky as flying a passenger jet with only one engine.
What are they thinking, why are they prepared to risk everything?
It boggles my mind.
Speaking for myself, running a bakery, I chose MS 365/Teams with regret but accepting that there's nothing else out there with the same value proposition except maybe Google workspace.
They have regional pricing so we get everything for the equivalent of $3.50 per user. Basically no other apps offer regional price - Slack alone would cost about $8 a user.
This includes chat, calls, messaging, 1tb of onedrive space per user, calendar, planner, emails, office, plus loads more.
Sure, it's janky but it basically works. The only thing I've found with a close value proposition (still slightly more expensive even if I limit to just a few gb of space per user) is self-hosted Nextcloud, which is about the same level of janky and requires a tech person or team to set up.
No reason to not just host email with any domain provider and manage the rest with a small NAS in the office.
Not only cheaper and taking away the update obligations of Microsoft. Which I am sure kills more productivity than managing a Synology server.
Also, much as I wish otherwise, very little happens via email in this business. It's all chat apps now.
The important part is cross platform real time communications, calendar, and office. Some kind of kanban board is a nice bonus.
Synology is also setup and keep running for years usually.
It's just an example tho. I just don't see any need for a Microsoft cloud solution for a small company (or anyone really)