I agree with your second point. I'm in the UK and have advocated this position for years. We have so much government infra here, considering NHS etc, that it would be cost effective to dedicate people to a "national standard computing" infrastructure. But it doesn't exist. Yet.
I am forced to use O365 every day in my work. It's a piece of crap. The LibreOffice equivalents that I have on my personal Linux machines are better for everyday office applications. As for server side, even if we leave aside all the times I see supposedly reliable MS infrastructure break when I'm trying to do an everyday task, a quick Google search will show you plenty of equivalents, and as for "scaling", the government, or any large organization, could get better value for money paying someone to engineer whatever customizations are necessary in the open source alternatives--which it could then deploy for free on as many servers as it wanted--than from MS's licensing model.
Also a lot of assumptions about the ROI there and the availability of any engineers who can customise it.
You suspect wrongly.
> There's a lot of collaboration stuff in there which is pretty much unbeatable.
Evidently you and I have had very different experiences.
You're welcome.
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> Show me an open source O365 equivalent that scales to the 10,000 seats in my org.
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> Now how do I collaborate with the people in the other 3 orgs I work with who use O365?
I hope you used an excavator, moving those goalposts.
(I will add I despise it to the core, but I know why people use it)
As you pointed out once the goal posts shifted, the reason they use Microsoft is because Microsoft is notoriously incompatible with anyone but Microsoft, but also ubiquitous.