The history of HashiCorp’s rise and IBM acquisition

Mitchell Hashimoto and Armon Dadgar founded HashiCorp in 2012 after they met at the University of Washington. Hashimoto previously created Vagrant in 2010 to automate the manual steps of setting up virtual environments. This tool allowed developers to build ready-to-use virtual machines, which saved them from the drudgery of re-installing software every few weeks. Vagrant also provided sandboxes for projects with conflicting dependencies, which kept workstations free of software hacks. Hashimoto wanted to automate any task he found repetitive, from script writing to course registration. The company started from an Ikea desk in an apartment and grew into a global provider. When they launched Terraform in 2014, they targeted the need for multi-cloud infrastructure management. This tool enables users to define servers, containers, and load balancers using Hashicorp Configuration Language. Terraform beat out competitors because it allows users to reference computed attributes of any resource at runtime. This functionality allows a user to start an AWS instance and then use its IP address to configure a DNS record in CloudFlare. Consul handles service discovery and configuration using an HTTP API and DNS. Before the company reached its current scale, VMware made a $100 million offer to buy the three-person team, but the founders rejected the deal.

Commercialization and the license shift

HashiCorp built a business on the commercial open source model. They release free tools like Consul and Vault, then sell enterprise versions with extra features like a GUI, improved support, or HSM integration. David McJannet became CEO in 2016 to provide the commercial discipline the founders lacked. The company went public in December 2021 at a $15 billion valuation, following a period of 75 percent year-over-year revenue growth. I find the August 2023 decision to change the Terraform license from the Mozilla Public License to the Business Source License to be a massive mistake. This move triggered the immediate creation of the OpenTofu fork as the community reacted to the restrictive new terms. New customer growth dropped to a low of 1.5 percent quarter on quarter growth immediately after the shift. Vault manages passwords and sensitive data in a modern way using an HTTP API under TLS. Consul handles service discovery and configuration via an HTTP API and DNS, answering questions like "where is service foo?".

The company’s revenue reached $583 million in 2024, even though net income sat at negative $191 million, with 89 percent of that revenue coming from 830 customers with over $100,000 in annual recurring revenue. HashiCorp maintains a workforce of roughly 2,200 employees and operates in over 175 countries.

IBM and the hybrid cloud

IBM finalized the acquisition of HashiCorp in February 2025 for a $6.4 billion enterprise value. This deal places HashiCorp products like Terraform and Vault into the IBM software portfolio alongside Red Hat and watsonx. IBM intends to combine Terraform’s automation with the Red Hat Ansible Automation Platform to simplify application configuration across hybrid environments. This integration helps clients manage the complexity of infrastructure sprawl caused by generative AI. The combination of Red Hat and Terraform will simplify provisioning across multiple cloud providers and help the deployment of IBM Z applications. HashiCorp currently manages a roster of 4,400 customers, including large names like JPMorgan Chase and Starbucks. Both companies’ boards approved the acquisition, which set a price of $35 per share in cash. You should observe how IBM manages the relationship between the developers and the corporate sales team. Will IBM eventually donate Terraform to a foundation to satisfy the OpenTofu manifesto?