Sidegrades you can mess about with are definitely fine. Good, even. But it's when it feels like those sidegrades are all you ever get in the game is where it becomes a problem for me personally. X-Com Apocalypse does have progression; while it's erratic and infrequent the biggest problem for me there is that it's just not really tied to player ability. Just a timer. Yay, X days have passed since I started the game. Now I can buy the flying armor from Marsec which is also kind of a sidegrade. The only R&D stuff you do as far as I recall is basically just advancing the plot (capturing and containing aliens, invading their dimension) etc. until the endgame where you get to make the endgame gear and make aircraft to invade the aliens.
UFO Afterblank games also suffer from this to a degree. You start the game using scavenged weapons and ammo, unlock ballistic gun+ammo manufacturing, then just use the same gun for the rest of the game (at least that's what I did). Sure, you unlock laser guns and warp guns and so on but those are complete sidegrades. You mostly just progress via units leveling op and upgrading their armor (which is itself a sidegrade, just with the benefits clearly outweighing the negatives).
Phoenix Point is pretty similar to Apocalypse in that way, now I think about it. Feels like the main source of progression is just locked behind the NPC factions doing arbitrary research and whatnot which you can't do. At least there's still more stuff for your team to do research-wise and you do have influence on the factions -- protecting their bases, building relationships, etc.