Xatu's main problem is that it cannot reliably defeat the two premier hazard setters, Froslass and Rhyperior. The two of them can hit it super effectively with Ice Beam or Rock Blast, respectively, and ultimately prevent it from accomplishing anything. Some other hazard setters, such as Azelf, Cobalion, and Empoleon can also do some nasty things to it.
That said, Xatu isn't all that bad. While it cannot beat most hazard setters, it still can prevent them from setting up hazards (and also give you the advantage), and it can spread paralysis. It is helpful for teams that have a large scale weakness to Stealth Rock, and it works very well on hail. I think it could also work well with Sableye as a duo to stop hazards.