As far as "screech to a halt." is concerned, it's maybe a little on the exaggerated side, but I'd believe it. I've worked for 5 different companies of varying sizes from 5 to 1000 employees. All of them have used Google Apps to run their business. Email, Calendars, Docs, Basically the Apps suite in it's entirety is the core of communicating and information storage.

There's arguments for backups, etc but in reality if the common business person working at these companies sits down and none of their Google products work, their day will halt.