Hosting your own servers for email and business files is infinitely more costly from a performance, uptime, and personnel standpoint, and self-hosted office with network shares is not suitable for most businesses' needs of multi-user collaboration (sure, you can use Office / M365 desktop apps which do collaboration, but then you're forced to use the desktop apps).
Google Workspace solves the issues of data privacy both by having extreme user data & datacenter access controls[0,1], a robust terms document that details how data is collected and used[2], and enterprise customers can access an audit report that details what and when things are accessed by Google employees[3].
