One can compete however he wishes, as long as he does so in accordance with the rules. Many people compete in IPSC using stock, or nearly stock guns. And there's now the Production Division and the Single Stack Division which allow few modifications.
Most serious competitors do use handloads, primarily, I believe, for economic reasons. Back when I was competing regularly, I was going through between 1,000 and 2,000 rounds a month. The cost would have been prohibitive if I were using factory ammunition.
But it's like any other game. The more serious competitors do whatever they can within the rules to get every permissible advantage. But make no mistake. The top shooters are great shooters. You could give any one of them pretty much any decent gun out of the box, and they'd shoot rings around most of us. They are extremely skilled and, like any competitor, look to their equipment for any additional competitive edge they can get.
But for us regular folks, IPSC competition (or IDPA), with our normal gear is great fun, and offers a lot of very good practice handling a gun safely under stress and while moving.
In IPSC competition, you really get the chance to practice things like always being aware of where your muzzle is, and keeping your finger out of the trigger guard and indexed along the frame except when you're actually shooting, and using the safety, engaging multiple targets, shooting quickly and accurately, shooting while moving, shooting from unconventional postures, etc. -- all while doing other things like moving around the course, sometimes opening doors or moving obstacles, identifying targets and reloading. And you're doing all this under stress -- because its competition and because you're on the clock.
So give it a try in Limited, Limited 10, Single Stack or Production Division. It’s a great way to refine your gun handling.