I've been using TFS since Beta 1 of the 2005 product and I have to say that I love it. I've read a lot of things from people blasting it and sure it was a v1 product 3 years ago and had some limitations (and still does) but come on people - it's pretty damn good. I'm currently in the process of setting up my 3rd implementation of TFS at my 3rd company. We use scrum as our development methodology. I've found some great resources I would recommend to anyone out there using TFS + Scrum to check out this link: http://www.scrumforteamsystem.com/en/default.aspx. They have a free scrum process template for TFS as well as a WPF Task Board application that allows you to do sprint planning and standup updates visually. The Task Board tool is especially slick. They just announced today that it will be commercially available before the end of Oct 2008 at a price of $95USD/user. That's a great price for what you get!
Before going this way we did look at VersionOne (http://www.versionone.com/). It's a pretty slick application as well that allows you to manage agile development. Ultimately we decided on TFS for a couple of reasons:
1) We had years of TFS knowledge in house (me).
2) TFS allowed us to customize the work item layout and process. We didn't see that in VersionOne.
3) We liked the fact that TFS was completely integrated into the VS2008 for our developers.
4) We liked the traceability throughout the process. For example we can assign a developer a sprint backlog item, have them work on it and as they do associate changesets and time to it. Later bugs can be associated to the sprint backlog item. At the end of the day we have complete tracebility: Product Backlog Item -> Sprint Backlog Item - > Changesets -> Bugs. Pretty sweet!
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