> Companies will require its use just to check email, though any IMAP client would work if the Exchange admin allowed it.
Exchange admins are a dying breed because on-prem Exchange is vanishing in favor of M365. Microsoft is slowly making IMAP and POP3 less viable, removing basic authentication a couple of years ago. If your client can't do OAuth 2.0, it can't access M365 over IMAP. It will not be surprising at all to see IMAP and POP3 deprecated entirely in the next few years, requiring all connections to go via API over HTTPS.
> Moving off of MS Word doesn't hurt their budget if you still need a license to MS 365 to get your email.
You can get less expensive licenses that give access to email. The F-series licenses give only web versions of Office access, though Outlook (which comes with Windows now) works just fine.
The reason that we have M365 E5 licenses, though, isn't so much the Office suite. It's everything else that comes with it: OneDrive, SharePoint (which we use almost entirely for file storage, not internal websites), PowerBI, and the security and compliance features. On top of that, we don't have to manage any of the patching or uptime of the services. They (mostly) just work. That Office comes with it is almost a bonus. For a small company, it's a godsend. For a medium-sized company like ours, that's a significant savings, probably several million dollars that would have gone to IT above and beyond what we already spend with Microsoft. Larger enterprises may have a different view, which is why so many are moving back on-prem for some services.
I would love to see some alternatives that could be run on-prem. LibreOffice Online development was stopped five years ago. Collabora Online offers its development edition that can be run locally, but support is limited. Realistically, almost any company is going to use Microsoft, Google, or (distant third?) AWS WorkDocs, and it will be that way unless and until open-source can come up with something that is relatively easy to set up and covers at least what M365 Business Premium or Google Workspaces provides.