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.
Sounds like even more of a single point of failure, just on your domain provider (who's much more likely to go out of business) than Microsoft. And one with no chat, or phones, or conference calling, or shared calendars, or endpoint management, or SSO, etc, etc.
Just sticking all your data on a cheap NAS in the office works for a few people, although it becomes PITA to do granular permissions when you don't have any proper central authentication. But then it's also a massive single point of failure, so you need to implement a backup solution, and then a way to share files outside of the organisation, and then a VPN so that people can work remotely, and then some monitoring so that you know when a disk fails....and that's getting way beyond what a non-technical person can manage.
It's fine if you're just using it for your hobby. But building your business on top of something like is very likely to come back and bite you in the arse.
And I am sure there are even better options than a household Synology.
But putting everything in a cloud and fully depending on a single provider that for the majority of people is in a foreign (and politically dangerous) country is definitely not the obviously better option.
And plenty of small businesses and hobbyists do that, and then after they "setup and forget" it they get compromised or lose their data a few years down the line.
Why would using a NAS (or small server) mean ignoring any basic logic (and business requirements) and not having off-site backups?
People absolutely should be setting up offsite backups. And more importantly, testing them so that they can prove that they work. But if they have no technical team then neither of those things are going to happen.