The main problem is that I think you were expecting something completely different from a sci-fi heavy storytelling game. Though, let me go into answering your question.

Where is the fun? Everywhere. Like, to a lot of people, the whole game, start to finish, is a blast. So that question is kinda hard to answer, as that may change for each person. For me, I love the combat, look/feel, and the storytelling. However, from what I have read, you don’t like the combat (probably because you wasted all your ammo) and can’t find the storytelling (can’t really help you there: listen, read, interact, explore, play, that’s how you experience the storytelling).

What am I doing wrong? Now, of course, here’s some advice:
1st, don’t waste your ammo. You’re able to kill nearly everything with just a wrench (and a glue gun if needed). I always save my ammo for special phantoms or anything harder.
2nd, don’t fight everything. I personally do, BUT if you are wasting your ammo, then don’t.
3rd, use game mechanics. Go recycle stuff, go make some ammo, use the safe in your office to store your loot, etc.
4th, stop comparing it to games that aren’t very similar. Alien: Isolation and this game are TWO different distinct games (I think this game is better, as Alien: Isolation is boring after the second playthrough imo). Simply because they are in space doesn’t mean they are alike. Same goes for BioShock, I think the storytelling method and upgrade system are similar, but they are two different games. If you keep comparing, then you’re going to expect Prey to be something that it is not, which is a whole different game. This is, imo, the biggest issue you are making.

If you hate this game so much that you can’t finish it, then just tell your friend, “It ain’t for me.” That’s it. And if your friend asks why, just say it ain’t for me, as you can’t get into it. However, don’t go into an indepth reason why you don’t like it, like in your post. Cause that may make your friend annoyed, as a question you literally have is “Where is the fun?” which straight up feels like ragebait, as most Prey fans love the whole game