While I'm a fan of self-hosting (I do it for email, contacts/calendar sync, RSS, etc), I'd say the problem there was a lack of backups, not the cloud service itself.

People think of backups as a way to protect themselves against hardware failure, but that's a reductive view; their purpose is to protect against systems failure, and a company is a single system. Sure they have their backups, but as you experienced, from the outside this is irrelevant - the system can fail as a whole, and therefore should be treated as a single copy.

Following the 3-2-1 rule, that might mean creating a second Google account with which you share all documents, and some process for backing up to outside Google (even if it's a regular manual use of Takeout).

Using a cloud service that can't be backed up is no different than trusting an hard drive not to fail.