I've used Google Apps for all of my businesses. I don't see any reason to not use it. You have better things to worry about than managing an email server. Get the Google Apps, spend a couple minutes to set it up and move on to something more important.
I don't think you can really go wrong using Google Apps. You can always change to something else later. However, I would recommend NOT registering your domain through them and having them set it all up for you. I did this and it's a painful process to switch registrars if you want to later.
Google apps is an excellent tool for a startup, but let me also plug Google Voice (which is NOT Apps capable at the moment, unfortunately). I've found Voice to be unbelievable useful in allowing me to have a stable "business" phone number AND a private cell phone while only paying for and carrying my personal cell.
Google apps comprises a great suite of software for your company.
Those are the essentials for a small company.
Your question is unfocused. Your question is similar to this one: Which would be better for me to drive- a red car or a blue one?
We need a lot more information from you before we can help you.
I'm not sure if by Exchange do you mean "Hosted Exchange" or do you mean installing and maintaining your own exchange server. Assuming you mean hosted exchange (and possibly the entire Business Productivity Online Suite ), it comes down to two things. Google has a free offering that in many cases is sufficient for small businesses. If you're comfortable with Google's applications then I see no reason why you should pass on free.
Microsoft's BPOS is $10/user/month. With it you get
If you need to use a web conferencing tool and/or the Communication services, Microsoft is a better fit (google doesn't have a similar offering currently). If you can do without, go with Google.
We have over 30 people on Google Apps for email and calendar. We don't use docs. Works great with Outlook with the Google Sync plugin, works with everyone iPhone, Palm, Droid, etc. Cheap (and free if the free version is good enough). You have more important things to worry about. Just do it.
We use GoDaddy for domains. Not the cheapest, but I have been using them for years and it works.
IMO, the best feature of Google apps is the GMail web-based email client.
The user experience is better than using Outlook. There are a lot of very useful features, for instance searching, tagging and the priority inbox.
Google Apps is much more than just email. It is a rapidly evolving suite, which in my opinion caters to all aspects of a startup. We started using Google Apps Standard and now use the Premier edition with more than 25 users
There are so many things which would suit your needs. I would suggest trying out the Standard Edition, which I believe would take care of most of a small startup's needs
Google Apps is always adding features to their email offering via the "Labs." These features are often great for increasing productivity and efficiency.
Some other great things that come with Google Apps:
I'm a fan.
Hands down, Google Apps wins over Outlook if you are a small startup. Apart from the numerous integrations with other Google services, the exciting things Google keeps adding to it's e-mail like 'Priority Inbox', 'Forgotten Attachment Detector', etc. can be used. No separate application, browser-based - my vote is for Google Apps!