It’s been four months since reports of IBM’s plan to acquire HashiCorp came out. However, it remains unclear what Big Blue plans to do with Terraform and the rest of the cloud management products under HashiCorp’s belt. This curiosity may sound unwarranted to some, but the DevOps community is currently in a state of limbo, especially when it comes to the possibility of Terraform reverting to its former open-source licence.
With IBM set to become the new owner of HashiCorp’s lineup of cloud infrastructure automation solutions, open-source advocates are hoping that the acquiring company abides by its claimed commitment to open-source. However, the open-source path may not be an enticing option, given the $6.4 billion that IBM is shelling out for the acquisition.
The future of Terraform and other HashiCorp products appears shrouded in mystery for now. Is this intentional, or is IBM just too preoccupied to engage with the Terraform user base? Here’s what we can gather so far.
No Final Deal Yet
To be fair to IBM, it may be too early to make their plans public given that they have yet to finalise the acquisition deal with HashiCorp. Around mid-July, the FTC sent a request to IBM regarding its planned purchase of HashiCorp. The FTC is seeking more information so they can properly evaluate whether or not the HashiCorp acquisition would have adverse effects on business competition, especially given how competitive the cloud computing space is.
IBM may still be working on the right strategy to make the most out of its multi-billion investment. Making more announcements that could be perceived as adding to unchallengeable dominance or a de facto monopoly in the cloud infrastructure and automation market through the HashiCorp purchase could add fuel to antitrust concerns.
It is understandable for the tech giant to be careful with their public statements regarding HashiCorp to avoid unnecessary antitrust controversy. Also, issuing premature statements could add to the state of confusion among existing users of HashiCorp products.
For context, it’s important to remember that HashiCorp has been incurring losses over the years. Despite going public in late 2001 and posting some encouraging revenue growth numbers, the company has always operated at a loss. In 2023, it recorded a $274 million loss and laid off around 8% of its employees.
These fiscal woes are arguably why the company decided to switch Terraform’s licence from open-source to Business Source License (BSL) last year. This announcement was widely panned by users, especially those who had enjoyed years of productive IaC management with open-source Terraform – some having themselves contributed code to the platform. Many are hoping that IBM’s involvement with HashiCorp will result in a reversion to open-source.
Open source is a challenging business, though. It attracts users, but it may not yield financial rewards. Some companies like Automattic (makers of WordPress) and IBM itself (through the Red Hat subsidiary) have succeeded with open source, but HashiCorp clearly struggled.
Balancing Business and Ecosystem Interests
IBM might follow what Google has done with Kubernetes, whereby Google supports the project with hundreds of full-time developers and generates profits indirectly by selling cloud infrastructure services necessary to run Kubernetes workloads. IBM could offer services relevant to Terraform or IaC management in general, for example, and generate revenues after reigniting Terraform’s popularity as an open-source tool.
The company could continue to improve Terraform Cloud, a hosted service that serves as a platform for collaboration among Terraform users at a premium price point. IBM could double down on this model to further develop Vault Cloud (secrets management) and Consul Cloud (service mesh), both of which saw signs of traction under HashiCorp.
The problem is that aside from being open-source, Terraform also attracted users because of its support for multiple clouds. Terraform allows DevOps teams to manage environments across cloud providers, which aligns well with the reality that most organisations nowadays prefer a multi-cloud strategy. It is unlikely for IBM to promote multi-cloud use at the expense of its own cloud offerings. IBM already has a diminutive share of the wider cloud provider market, at around 2%. The more logical option for it is to leverage HashiCorp’s products to gain more market share – not to let others carry on their dominance.
It is possible for IBM to firmly associate Terraform and other HashiCorp products with the company’s cloud solutions. If direct integrations are developed, they will most likely be limited to IBM products under Red Hat. It would be inconceivable for a company that shelled out more than $6 billion on a company acquisition to disregard profitability.
IBM is most likely still coming up with creative plans to leverage the renown of HashiCorp’s products for them to add value to the company’s cloud and IaC businesses. Achieving profitability and satisfying customer expectations is a tough balancing act. There is no room for vague announcements that can stir confusion among customers, create false hopes among open-source advocates, or agitate stockholders.
Unwilling to Admit the Challenges?
Stockholders were not enthusiastic about IBM’s plan to acquire HashiCorp. IBM shares tumbled by more than 8% on the day IBM confirmed the acquisition plan. However, it is important to point out that IBM’s stock price has since rebounded to where it was prior to the company’s HashiCorp purchase announcement in May.
On the other hand, many are sceptical over the feasibility of IBM’s purchase of HashiCorp given that IBM owns Ansible, a product similar to HashiCorp’s most popular product, Terraform. Some analysts say the customer base that IBM has the potential to acquire by buying HashiCorp may not be significant. After all, many Terraform users have already switched to alternatives like OpenTofu, which is an open-source fork of Terraform.
HashiCorp is not keen on sharing the number of customers they have lost after the licence change, but there are many anecdotal accounts of the exodus from HashiCorp products shared online. Also, many in the open-source software developer community have already begun contributing to OpenTofu instead.
It bears pointing out that IBM’s Ansible and HashiCorp’s Terraform were the top two configuration management tools at some point, holding almost the same market share. Die-hard open-source advocates may generally have strong aversion to open-source projects owned by for-profit entities, but this may not be as strong of a deterrent when it comes to cloud infrastructure and IaC management, simply because there aren’t that many competing tools available.
Also, the competition posed by OpenTofu could cease to exist if IBM decides to revert Terraform’s licence back to open-source. Sebastian Stadil, a co-maintainer of the OpenTofu project, has said that developers are open to reconciling the fork with Terraform if the latter returns to open-source licensing.
IBM’s acquisition of HashiCorp is not the usual story of a tech giant devouring a fledgling. While HashiCorp was certainly a leader in its field, profitability eluded it for quite some time. Conventional wisdom would say that IBM does not need HashiCorp, because it already offers products similar to what HashiCorp offers. Plus, Terraform is designed for multi-cloud support, which is somewhat incompatible with IBM’s business objectives of keeping customers within the IBM cloud ecosystem.
What exactly does IBM intend to do with HashiCorp’s products to make them profitable and boost IBM’s standing in the cloud and IaC management market without setting off objections from antitrust regulators and the wider DevOps community? For now, IBM’s plans continue to be a mystery, but we’re likely to know a lot more in the months ahead.
