What are the downsides to using Time Machine?
Here are some of the limitations you have to accept or mitigate if you choose Time Machine:
Time machine requires an apple specific HFS+ filesystem to store backups.
The backup isn't bootable.
The backup doesn't record differences inside a file. Large (database) files with tiny changes make each incremental save longer and move more data. This also can eat up storage space faster if these type files are not excluded and potentially backed up another way if they can't be regenerated after a restore (like mail stored on IMAP servers)
It must be an external drive or an official apple network destination like TimeCapsule or Mac OS X Server to be a supported by Apple.
It will delete backups according to the official scheule ( hourly backups combine and expire after a day. Dailies expire after 31 days. Weekly backups can be deleted if there isn't enough space to contain the estimated size of the next backup. In odd cases or if there is a bug, you could end up with all the history gone an one copy of the last backup.
The destination volume must be larger in size than the boot volume.
Once you are aware of these limitations, it's fairly easy to work around all but the first limitation with some planning and/or extra software / hardware. The HFS+ format for storage is pretty inflexible with no realistic mitigation or workarounds.
Another thing worth mentioning, rather than which backup application to use, is the entire strategy behind your backup plan and the physical issue: If both your computer and the external drive with Time Machine are in the same location, and the building burns down, you lose both of them, and all your data. So people who are paranoid in a good way would back this up further with a cloud-based solution for backing up a sub-set of their critical data off site (say over the Internet using Carbonite, Mozy, and/or iCloud), or they would have multiple physical hard drives or tape backup systems and they would physically move a backup volume to a remote location (in another building, in another part of town) on a regular basis. Not everybody needs this extra security, but it's worth considering in the larger question.
I'll add my answer from my own experience. With time machine:
You can only really backup to one location automatically, be it USB or network, and to backup to two or more locations requires fiddling around in either System preferences each time or with complicated stuff on the command line
Network linked TM locations e.g time capsules use broadcast protocols to negotiate the connnection, which doesn't scale well on large networks
- For the above reason you can't trivially backup to a network location in a different subnet - which ties in with one of the other comments needing to backup offsite
- You can't change backup schedules easily
- You can't easily anticipate what old backups TM will delete - I've been burned a few times by TM deleting my backup history when I've accidentally included too many files
- It's not trivial to offer large amounts of TM backup space to end users. I'd like to allocate say 8TB for users to do TM backups but what should I use to do that? A mac-mini with a drobo attached??
It takes a bit of effort to move TM backups between media, e.g Upgrade time machine storage?
No deduplication, but that may be asking a bit much.
In my work environment we use Commvault Simpana to backup our servers and some desktops. We are able to backup offsite and onsite simultaneously to multiple locations and media, on a schedule we choose. Commvault is a difficult to set up, expensive backup suite so I'm not making a direct comparison here, but it's interesting to explore nonetheless what other backup software offers that TM doesn't. Please feel free contradict anything I've said above with examples, as I'd love to be able to get around some of these issues I've outlined.