A lot of institutions used to run their own e-mail. Over the years I've watched as my e-mail addresses (both universities and my current employer) have been replaced by Gmail on the backend. All of them stopped being willing to manage e-mail themselves. None of them were willing to use a less surveillance-oriented provider. That choice wasn't made by consumers. It was made by the same kind of informed IT people. I suspect it wasn't free, either.
I thought the main problem with e-mail specifically was spam, and the reputation model that's arisen to combat it: a medium-sized university running their own e-mail service runs a risk of getting their domain blacklisted, if a few accounts are compromised and start sending out mass mailings.
