In the hybrid-cloud world, we all knew that HashiCorp, makers of the popular infrastructure as code (IaC) tool Terraform, was looking to be acquired.
We also knew that switching Terraform’s open source Mozilla license for the Business Source License (BSL 1.1) had left plenty of unhappy Terraform developers and partners in its wake. Those open source users created a Terraform fork called OpenTofu. OpenTofu took off quickly, causing lawyers to get involved.
But that kerfuffle didn’t stop IBM from announcing it was buying HashiCorp for a cool $35 per share, a deal adding up to a premium value of $6.4 billion.
IBM chairman and CEO Arvind Krishna announced the acquisition in a Q1 financial call. Krishna remarked, “As generative AI continues to evolve, the complexities in tech strategies have significantly increased. HashiCorp’s stellar record in simplifying this modern infrastructure sprawl makes them an ideal addition to IBM’s hybrid cloud vision.”
The HashiCorp acquisition fits neatly with IBM’s 2019 acquisition of Linux and cloud power Red Hat. From a technical viewpoint, Ansible and Terraform are well-suited to work together. IBM clearly hopes that HashiCorp Terraform and Vault, its secret and encryption manager, will help strengthen its hybrid cloud and DevOps efforts.
HashiCorp’s co-founder and CTO Armon Dadgar is enthusiastic about joining forces with IBM. “This merger is not just a growth trajectory for HashiCorp but a gateway to bring advanced cloud solutions to a broader audience, accelerating innovation and enterprise efficiency in cloud management.”
HashiCorp’s CEO, Dave McJannet, agreed. “IBM’s leadership and rich history in hybrid cloud innovations make it the perfect home for HashiCorp as we step into a vigorous phase of our growth.” IBM sources say that McJannet will report to Rob Thomas, IBM’s senior VP in charge of software.
The Industry Responds
“According to our research, more than six tools are used by organizations to support cloud computing and automation. The combination of IBM, Red Hat, and potentially HashiCorp product portfolios suggests changes in cloud computing and the overall automation landscape,” said Paul Nashawaty, a practice lead at The Futurum Group. “It is an alliance of seasoned professionals that goes beyond a simple technology merger to give organizations the tools and insights they need to manage the complex web of modern IT with efficiency and foresight.”
While HashiCorp’s licensing move seems to have paid out for HashiCorp’s investors, IBM’s investors don’t seem so keen on the deal. In early after-market trading, IBM’s shares declined. Even before the BSL 1.1 changeover appeared, HashiCorp’s revenue growth had been slowing.
It should be noted that while IBM’s earnings were lackluster in most areas, the financial call called out positive news in software. Krishna and CFO Jim Kavanaugh credited Red Hat, especially its OpenShift hybrid cloud platform and its Ansible DevOps platform, for this growth. Kavanaugh said, “Both offerings also continued to take market share this quarter.” Specifically, Red Hat’s revenues grew 11% year-over-year, with OpenShift growing over 40%.
Setting the business aspects aside for now, it’s an open question what this will mean for Terraform and OpenTofu. Will IBM return Terraform to its open-source roots? Will IBM, a top Linux Foundation member, try to unite the warring sides? Stay tuned. It’s going to be a bumpy ride.
Photo credit: Hamid Roshaan on Unsplash.