Sure, and that's why we're moving off Google for hosted Apps.
I entirely agree- When things are mission critical to you, you need them in an environment where you can control it, back it up properly, and ensure it stays up.
We're not a priority to Google (Understandably.)
For things that really matter to your company, you should bring them in-house, so you can ENSURE they're backed up, and available when necessary. At least that way when things do fail, you can make fixing it a top priority, rather than a nice-to-have.
I don't follow. Why does the fact that you have to do your own backups mean that you can't use Google (or, conversely, why does using Google mean that you can't do your own backups)?
You certainly can pay to use Google Documents and do your own backups. It's just that doing so would defy the biggest appeal of the service. The appeal is that Google handles day-to-day operations for you.
There's more to "day-to-day operations" than backups.
The reality is that Google is much less likely to damage or lose your data than you are, but it's always good to keep extra copies around locally. This is important for many reasons, like access when either Google or your whole net connection is unavailable, and more flexibility with the data.
I think you are unfairly contrasting he flaws of something that exists against he perfection of something you want to exist.
In-house IT fails plenty of the time also, and plenty of organization cannot afford to fix some failures. One must consider the probabilities in all cases.
