Why the Terraform Licensing Shift Matters and What Comes Next

A sudden licensing change just reshaped one of the most widely used tools in cloud infrastructure. Terraform, long a cornerstone of open-source infrastructure as code (IaC), has moved to a more restrictive Business Source License (BSL). While the change may not impact you immediately, it introduces long-term risks, especially around vendor lock-in and future access to updates.

For IT teams managing infrastructure across multiple cloud platforms, this marks an inflection point. Now is the time to reassess your IaC strategy before those risks become reality.

Why this matters right now

Terraform’s cloud-agnostic design makes it a favorite for multicloud and hybrid environments. It can provision and manage infrastructure across providers like Amazon Web Services (AWS), Microsoft Azure, Google Cloud, Kubernetes and VMware using a consistent workflow and syntax. This flexibility helps you avoid vendor lock-in and simplifies operations across complex architectures.

The new licensing model, however, signals a shift from community-first governance to a more commercial model. That opens the possibility of paid-only features and restricted functionality — changes that could limit the freedom and interoperability many organizations rely on.

What changed from open source to BSL

Terraform’s move to the BSL changes the rules. Unlike true open-source licenses, the BSL is not OSI-approved and restricts how the software can be used, especially for packaging or resale. The immediate impact is small, but the shift creates space for future limitations, from restricted updates to pressure toward paid services.

For organizations that built strategies around Terraform’s open-source roots, this is more than a license change. It’s a change in the long-term relationship between the tool and its users.

What OpenTofu offers today

OpenTofu has emerged as the open-source successor to Terraform and is now generally available for production use. It already delivers some features that aren’t found in Terraform, such as client-side state file encryption that protects sensitive data in any backend, not just in the paid enterprise editions. This innovation continues with built-in features like a more advanced testing framework and improved CLI output, proving that OpenTofu isn't just preserving the past, but actively building the future

Backed by the Linux Foundation, OpenTofu offers the same IaC functionality Terraform provided before the license change, while maintaining a commitment to community-driven development. Over time, OpenTofu and Terraform will diverge, creating a growing gap in features and philosophy.

What to expect over the next two years

Teams committed to avoiding vendor lock-in will increasingly adopt OpenTofu. While enterprises invested in Terraform’s paid services may stay the course for now, new projects and flexibility-focused teams are likely to choose OpenTofu from the start.

As Terraform integrates more paid-only features, OpenTofu will remain open and portable. The recent acquisition of HashiCorp by IBM adds further uncertainty. While IBM has a history with open source, large acquisitions often bring changes in strategy, product direction and licensing. The acquisition introduces new questions about Terraform’s long-term direction and independence.

Key adoption considerations

Migrating from Terraform to OpenTofu today is relatively straightforward. Both share compatible core language and state files, making the transition low-risk and low-effort. However, that window will narrow as each platform introduces exclusive capabilities that make future migrations more complex. Switching now isn’t about fixing today’s technical issues — it’s about preserving your flexibility for the future.

What you should do now

Many organizations are still unaware of the long-term implications of this licensing shift. We work with customers to evaluate their position now, before new restrictions become embedded in the tools they depend on.

Shawn Dumser, Senior Cloud Engineer at Rackspace Technology and Terraform Committee Lead, helps guide these conversations, offering practical insight into the trade-offs of staying with Terraform versus moving to OpenTofu. This internal expertise is something we now extend to our customers, providing clear, unbiased roadmaps for their IaC strategy.

Avoid vendor lock-in while you still can

OpenTofu gives you the freedom to control your own roadmap. In a landscape now shaped by the BSL and IBM’s acquisition of HashiCorp, the decision to migrate may not feel urgent today. But it’s a strategic move that keeps your options, and your architecture, truly open. Rackspace Technology can help you evaluate IaC strategies based on your long-term goals, so the tools you choose today won’t limit what you can do tomorrow.

Let’s start the conversation.