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The Impact of Terraform License Change – Users & Providers

terraform license change


  • August 10th, 2023: HashiCorp announces Terraform BSL license change.
  • August 15th, 2023: An initiative called OpenTF releases the OpenTF Manifesto, asking HashiCorp to reverse its decision to adopt the BSL license.
  • ‍August 25th, 2023: OpenTF announces an open-source fork of Terraform.
  • September 5th, 2023:  The OpenTF repo goes public after its manifesto garners more than 32K GitHub stars.
  • September 20th, 2023: The Linux Foundation accepts OpenTF as a project, and OpenTF becomes OpenTofu.
  • October 4th, 2023: OpenTofu alpha goes live. 
  • ‍Nov 30th, 2023: OpenTofu 1.6.0 beta release includes a new public open-source registry.
  • December 19th, 2023: OpenTofu launches a stable release candidate.
  • January 10th, 2024: With the launch of its first stable release, OpenTofu is ready for production use.
  • April 30th, 2024: The OpenTofu v1.7 release introduces state file encryption.

Please note: The information in this blog does not constitute legal advice, and it is not intended to.

On August 10, 2023, HashiCorp announced a licensing change for all its products, including Terraform. Terraform is a key tool for DevOps, allowing software teams to define, launch, and manage infrastructure with code, so the HashiCorp license change has wide-ranging repercussions. In this article, we discuss those repercussions, explain what the license change could mean for you, and suggest ways to mitigate its impact.  

What we will cover:

  1. What is the HashiCorp BSL license?
  2. What does the Terraform license change mean?
  3. What is the likely impact of the Terraform BSL license change?
  4. What is the Terraform fork?
  5. OpenTofu: An open-source alternative to Terraform

What is the HashiCorp BSL license?

Terraform has been part of the open-source community since 2014. Since its launch, it has operated under the open-source Mozilla Public License v2.0 (MPL v2 license), but HashiCorp has changed its source code license to the Business Source License v1.1 (BSL 1.1) for all future releases of HashiCorp products. 

BSL 1.1 (often acronymized to BUSL 1.1) is not an open-source license: It is a source-available software license, which means that only certain classes of users have the right to use the software. Direct HashiCorp competitors will not be permitted to incorporate the source code or embed or distribute versions of Terraform released after the announcement. 

HashiCorp has promised to keep Terraform free and open source to specific users, but the BSL allows them to change the license in the future with little notice. It also lacks the transparency of open-source licenses such as Apache 2.0 or MPL 2.0. 

What does the Terraform license change mean?

The Terraform BSL license change prevents direct HashiCorp competitors from offering competitive services incorporating BSL-licensed code. This means these vendors cannot incorporate Terraform releases, bug fixes, or security patches beyond Terraform 1.5.x. 

Which version of the Terraform license is changing?

The change affects all Terraform versions after 1.5.x, which will be released under BSL 1.1. Versions up to and including 1.5.x are MPL-licensed, so they remain open source. 

Is Terraform no longer open-source?

The license change means Terraform is no longer open source. Although everything created before version 1.5.x remains open-source, any version released after that is governed by the BSL license. Access to the public source code will remain available, but outside of HashiCorp’s additional use grant, you’re not allowed to use Terraform for commercial purposes without a special license grant from HashiCorp.  

Why was the change made?

HashiCorp says it changed the license so it can better manage commercial uses of its source code and continue to invest in its community of practitioners. The company says it can no longer tolerate the sale of commercial products that use its source code. It also claims the change will not affect most users of its products because they are not direct competitors. Nonetheless, the license change has sparked mixed reactions from the open-source community.

What is the likely impact of the Terraform BSL license change?

The HashiCorp BSL license decision could establish a precedent for the way other open-source projects are managed and licensed. It could also undermine the culture of community contributions and the spirit of collaborative development that has long characterized open-source software. Understanding the potential consequences of the license change is vital for businesses and developers that use Terraform. 

Here’s a glimpse into the likely outcomes:

Impact on Terraform end users

The move to BSL means that any company HashiCorp considers a commercial competitor will have to pay for BSL licensing to use future versions of Terraform, but if you leverage Terraform internally as part of your company’s infrastructure, you can keep doing so without any change. 

For example, DevOps engineers who work at SaaS companies hosted in the public cloud and write Terraform scripts to build and maintain their own cloud infrastructure are not affected because their usage is entirely for internal purposes. 

However, proprietary licenses tend to create uncertainty, and engineers do not want uncertainty in their tooling and workflows. Those who have come to rely on Terraform’s open ecosystem may be disappointed by the licensing shift, particularly because the BSL allows Hashicorp to change the license in the future with little notice. 

Impact on the Terraform provider ecosystem

Terraform’s ecosystem of third-party providers is largely responsible for the strength and versatility that make Terraform so useful. That’s why SaaS companies in particular will be paying close attention to the effects of the Terraform BSL on the provider ecosystem — any significant upheaval there could disrupt their own infrastructure automation and workflows.

HashiCorp maintains that the Terraform license change will not impact any existing Terraform providers, but the Terraform BSL could undermine trust in the direction of the project. It will make provider developers hesitant to do all the work required to integrate with a tool that could suddenly change its licensing and potentially disrupt their roadmap. If developers ultimately choose to work only with infrastructure tools governed by completely open-source licenses and more stable, transparent roadmaps, Terraform’s provider ecosystem could suffer. 

That could encourage more providers to reconsider their investment in Terraform, reducing the options available for custom integrations for SaaS companies and startups, which would ultimately become less flexible. This would be a difficult scenario for those who have designed their infrastructure automation around Terraform and its vast provider ecosystem.

Impact on the Terraform community

Terraform’s license change evoked a strong negative response in the open-source community.  

An analysis of GitHub activity metrics immediately before and after the Terraform license change shows a marked decline in community contributions. Only 9.30% of all pull requests were opened by the community in August — compared with 21.12% a month before the announcement. This decline continued into September, with 9.52% of pull requests being opened by the community and the rest by HashiCorp. This sustained negative trend in August and September may represent community dissatisfaction with the licensing change.

Opponents viewed the switch to a proprietary, source-available license as a blow to the principles of transparency, trust, and community that open-source software is built on.  HashiCorp is clearly entitled to protect its commercial interests, but the move has highlighted the risks associated with relying too much on a single vendor or tool. 

Impact on integration partners

Hashicorp says that the license change will not impact partners that build integrations with the company’s products, including Terraform providers, Vault plugins, and other product integrations. They can continue selling services on top of Terraform.

Organizations building competing solutions that integrate with HashiCorp products are advised to talk to the company. The BSL license does not permit competitors to use “community edition” products free of charge, but competitors can avail of commercial licensing terms to enable use cases beyond the BSL restrictions. 

Impact on commercial customers of HashiCorp

The Terraform license change will not impact HashiCorp’s commercial customers. Those users leverage the company’s technology under separately negotiated licenses.

Impact on others

Many Terraform users do not fall into neat categories when it comes to whether the shift to BSL will affect them or not. If the previous categories do not apply and you remain unsure whether the license update affects you, consider whether either of the following conditions is relevant to your use case:

(a) Is Terraform embedded in your product? The HashiCorp BSL license defines “embedded” as either including the source code or executable code in a version that competes with Terraform or packaging your product in such a way that Terraform must be accessed or downloaded for your product to work. If you have created a product that embeds Terraform, you should contact HashiCorp to clarify whether it violates the new BSL license.

(b) Does your product compete with HashiCorp’s products? This is more difficult to determine because it is up to HashiCorp to decide if a specific product is competitive. For all versions of Terraform after 1.5.x, Hashicorp will not allow organizations selling competitive offerings to use the community edition products free of charge under the BSL license. To enable use cases beyond the BSL restrictions, competitors can contact HashiCorp to avail of commercial licensing terms.

What is the Terraform fork?

Following the HashiCorp BSL announcement, hundreds of businesses and individual users concerned about the change formed a group called Open Terraform (OpenTF). They published the Open Terraform Manifesto, advocating for Terraform’s return to an open-source license and outlining plans to fork the Terraform project if the license was not reverted. When HashiCorp did not reverse its decision, OpenTF forked the legacy MPL-licensed Terraform under the name OpenTF. 

OpenTofu: An open-source alternative to Terraform

Nobody could have predicted the community’s phenomenal response to OpenTF. Within a month, the manifesto repository had garnered more than 33,000 stars, with almost 140 companies and 700 individuals pledging their support. The OpenTF fork of the MPL-licensed Terraform went public, and, on September 20, 2023, the project was accepted into the Linux Foundation as OpenTofu. 

OpenTofu is a completely open-source fork of Terraform that works as a drop-in replacement for Terraform version 1.6 and is backward-compatible with earlier versions. Since its launch, OpenTofu’s core team of engineers has been working hard to introduce functionality that Terraform users have requested for years. 

Two weeks after joining the Linux Foundation, OpenTofu launched its first alpha release — a drop-in replacement that could be integrated quickly and easily into workflows. The first stable release came in January 2024, marking the project’s development into a powerful, production-ready, infrastructure-as-code tool in under five months. The latest OpenTofu version (1.7) is crammed with new features, enhancements, and bug fixes designed to enhance the user experience, overall functionality, and IaC management capabilities.

If you are looking for help in migrating from Terraform to OpenTofu, or if you are searching for an infrastructure management platform that supports top flavors of infrastructure as code (including OpenTofu 1.7), configuration management, and container Orchestration, don’t hesitate to reach out to Spacelift.

As a founding partner of the initiative, Spacelift offers the native and commercial support you need to ensure your OpenTofu success. Learn more about OpenTofu Commercial Support & Services.

Wrapping up

The Hashicorp license change to BSL marked a pivotal moment in the history of DevOps. It represented a shift away from Terraform’s open-source heritage and created uncertainty in the community and ecosystem that had grown up around the favored IaC tool. That community has since rallied around OpenTofu, which has emerged as a robust, secure alternative to Terraform that will always remain open-source. A founding partner, Spacelift offers native and commercial support for OpenTofu.

OpenTofu Commercial Support

Spacelift offers native and commercial support to ensure your OpenTofu success. If you need a reliable partner to run your critical workloads with OpenTofu, accelerate your migration, provide support coverage, or train your team – we are here to help.

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