Open Office etc. have been tried by governments with varying degrees of success. I think Germany is the best known example.

One issue that isn't really about the software is the accountability. If it breaks, or it breaks something else, who's is responsible? Governments can either pay a lot of money to fix it themselves or wait and hope for someone else to do it eventually. With paid software it's a lot easier to confront the tech company because they were already paid for it to work, so the responsibility of it working is very clear. Also using "industry standards" ensures that someone else has he same problem, so there are many others who also want it fixed.

The days where every company had an IT-department is long gone. Today software needs to work without individual customization. Thankfully there are also better standards for everything like documents, file exchanges, APIs etc., so technically open source ought to be able to do it just as well as commercial software. It's just that we also know that software is never really finished or complete. It has to be updated continuously because things keeps evolving. That is more difficult when not using the de facto standard.