It has been more than a month since IBM announced its acquisition of HashiCorp, the creator of the popular Infrastructure-as-Code (IaC) tool Terraform. Some welcomed the purchase and considered it a perfect fit for IBM’s cloud expansion. However, others suggest that the deal could be a mistake for Big Blue, a company known for pushing things forward in emerging areas of technology.
One of the criticisms of IBM’s purchase of HashiCorp is the latter’s decision to abandon open-source licensing. Last summer, HashiCorp had switched from the Mozilla Public License (MPL) to the Business Source License (BSL) for most of its products.
This took place mere weeks after the Terraform Cloud service changed to a far more expensive billing model, with pricing based on resources under management (RUM) instead of the number of user seats. These changes have compelled some developers to leave Terraform in favor of open-source alternatives. Many enterprise users have also followed suit.
Terraform has roughly the same number of users as Ansible, an IaC tool owned by IBM under its Red Hat subsidiary. It is estimated to have a market share of 32.21%, while Ansible’s is 31.33%. However, given the controversy surrounding the license change, it is reasonable to expect that the Terraform user base has shrunk. Many former Terraform users have switched to open-source IaC alternatives such as OpenTofu, which was created based on a Terraform fork following the switch to BSL.
Nevertheless, IBM’s move to take the helm at Terraform is giving open source enthusiasts a sense of optimism. IBM is well-known for its affinity to open source. Its solutions are designed to support open environments, from modern cloud app development to database platforms and DevOps. Terraform and OpenTofu do have the potential to merge again. There might even be a chance that Terraform’s RUM billing model could be replaced or at least improved.
Unfavorably perceived billing model
The Terraform Cloud RUM-based pricing scheme sees organizations paying on a per-hour basis for the resources they use, not according to the number of users that connect to the platform. It calculates the bill based on the number of Terraform-connected cloud environments, including load balancers, buckets, clusters, and instances.
While some find this billing model cost-efficient, others say that it results in higher charges for them. The hourly billing can accumulate uncontrollably. It does not help that HashiCorp bills partial hours as full hours. Terraform does still offer a free pricing plan, but it only covers the first 500 managed resources every month.
Overall, this Terraform billing model tends to be cost-effective for small deployments. When it comes to larger deployments that involve a multitude of resources, however, it may no longer be advisable. Larger deployments understandably entail higher charges, and they often become less cost-efficient because of the complexities of monitoring increasing numbers of resources that connect to Terraform.
Will IBM keep the RUM flowing?
IBM has yet to make any official announcements regarding the future of Terraform’s RUM model or the possible return to open-source licensing. More than a month after the announcement of the HashiCorp acquisition, IBM continues to be elusive about its plans for Terraform and for HashiCorp in general.
However, there are some actions that may provide hints. For instance, Red Hat’s mid-2023 decision regarding RHEL’s source code does not bode well with open-source aspirations. Nearly a year ago, Red Hat decided to limit RHEL code access to paying customers. This was a full reversal of the company’s previous policy of making the RHEL code freely available to everyone.
Based on this development, it follows logically that IBM is more inclined to make decisions according to what makes the best business sense. The company spent over $6.4 billion to buy HashiCorp. There is no doubt that it will try to recoup the investment through various means. It is possible that IBM will try to generate revenues from Terraform through a Business Entity License (BEL). IBM might decide to modify the RUM model to make it cost-efficient even for smaller deployments.
IBM could also be taking a novel approach to generating revenues without abandoning the open-source model altogether.
When factoring in HashiCorp’s latest financial results, which saw a 16% revenue increase year-over-year, there is a good chance that IBM will continue with the business license model a bit longer. HashiCorp managed to increase its customers from 4,423 to 4,558 over the course of Q1. Also, the company increased its revenue from the cloud platform from $21.3 million to $24.6 million. There may be enough reasons to explore opportunities with the business license first before deciding to completely revert to open source or try some other monetization methods.
The RUM model has its share of criticisms, but it is not yet proven to be entirely disadvantageous from a business perspective. IBM has yet to experiment with any adjustments to conclusively say that the Resources Under Management billing model is not viable.
Leaning towards open source
Despite the understanding that IBM will not be drastically changing the licensing model of HashiCorp’s products in the short term, industry observers are convinced that IBM will be moving towards open source in the long run.
IBM already has an open-source IaC tool in Ansible. Terraform is expected to snag customers who may find Ansible not suitable for their needs. Industry analysts believe that the HashiCorp acquisition is IBM’s attempt to broaden its market reach, while filling in needs not properly addressed by Ansible. These goals are unlikely to be achieved by a solution restrained by a business license.
It is rather inexpedient for Terraform to be offered under a business license while attempting to complement an open-source solution (Ansible). It’s possible that IBM is simply making a clever move to reach out to more customers through a solution whose technologies are derived from a competitor.
In conclusion
IBM’s acquisition of HashiCorp may not immediately change Terraform’s RUM billing model, but there are indications that open-source will ultimately be the future of Terraform under IBM. Big Blue has a solid track record of advancing open-source projects, but the company may try to make existing models work first before deciding to switch to new strategies when it comes to Terraform.
Featured image credit: Sean Pollock/Unsplash
