Terraform License Change (BUSL/BSL): Impact on Users and Providers

If you run Terraform in production, someone on your team has probably asked whether you are still allowed to. For most teams the answer is yes, and it has been yes since the license changed in 2023.

Terraform 1.6.0 and every release since ship under the Business Source License 1.1 (BUSL 1.1), which is source-available rather than open source. The licensor is now IBM, which completed its acquisition of HashiCorp on February 27, 2025.

The restriction is narrow. It applies to offering Terraform to third parties on a hosted or embedded basis in order to compete with IBM’s paid products. Running Terraform against your own infrastructure, including commercially, is permitted.

This article covers what the license says today, who it affects, when the restriction expires, and what teams did in response.

Disclosure: Spacelift is an infrastructure orchestration platform and a founding member of the OpenTofu initiative. That makes us an interested party in this story. It also means we ran the license review described below on ourselves. The information in this blog does not constitute legal advice, and it is not intended to.

What we will cover:

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

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 (BSUL 1.1) for all future releases of HashiCorp products. 

BUSL 1.1 (sometimes written BSL) is not an open-source license. It is source-available: you can read and modify the code, but the license carves out one class of commercial use. The test is not whether you are a “direct competitor.” It is whether you offer Terraform to third parties on a paid basis in a way that significantly overlaps with IBM’s paid versions. Products not offered on a paid basis are not competitive.

BUSL does not work retroactively. The license states that it applies separately for each version, and that the Change Date may vary for each version. A release that shipped under BUSL cannot be pulled back or made more restrictive later. What the licensor can do is publish future releases under different terms, which is what happened in 2023.

When does Terraform’s BUSL license expire?

The license file sets a Change Date of four years from the date each version is published, and a Change License of MPL 2.0. The restriction expires release by release rather than never lifting.

Terraform 1.6.0, the first BUSL release, was published October 4, 2023. It converts to MPL 2.0 on or around October 4, 2027. Terraform 1.7.0 follows in January 2028, and so on down the line. The licensor on the file is now IBM, following the acquisition, but the terms are unchanged.

For most teams this is academic. The Additional Use Grant already permits production use, and the restriction only bites if you’re offering Terraform on a hosted or embedded basis in competition with IBM’s paid versions. For those who are, it’s cold comfort. By the time 1.6.0 converts it will be four years and a dozen minor releases behind.

The Terraform BUSL license change prevents direct HashiCorp competitors from offering competitive services incorporating BUSL-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?

Terraform’s LICENSE file scopes BUSL 1.1 to “Terraform Version 1.6.0 or later.” Terraform 1.5.7, released September 7, 2023, is the final MPL 2.0 release, and it stays MPL-licensed permanently. That is the version OpenTofu forked from, and the reason a fair amount of tooling still pins to it.

Is Terraform still open source?

Terraform 1.6.0 and later are source-available, and the source code stays public and free to download. The Additional Use Grant permits production use, including commercial production use, and excludes only offering Terraform to third parties on a hosted or embedded basis in order to compete with IBM’s paid versions. Internal use, across all affiliates under common control, is explicitly permitted.

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.

Who owns Terraform now?

IBM. It announced the acquisition on April 24, 2024 and completed it on February 27, 2025 at an enterprise value of $6.4 billion. Terraform’s LICENSE file now names International Business Machines Corporation (IBM) as the licensor, with the licensed work under IBM Corp. copyright.

The terms did not change when the ownership did. The Additional Use Grant, the Change Date, and the Change License read the same as before, with IBM’s name in place of HashiCorp’s. Any guidance you read that refers to “HashiCorp’s license” was written before the acquisition closed.

License change timeline

• August 10, 2023: HashiCorp announces Terraform BUSL license change.
• August 15, 2023: An initiative called OpenTF releases the OpenTF Manifesto, asking HashiCorp to reverse its decision to adopt the BUSL license.
• ‍August 25, 2023: OpenTF announces an open-source fork of Terraform.
• September 5th, 2023:  The OpenTF repo goes public after its manifesto garners more than 33,000 GitHub stars.
• September 20, 2023: The Linux Foundation accepts OpenTF as a project, and OpenTF becomes OpenTofu.
• October 4, 2023: Terraform 1.6.0 ships as the first BUSL release, setting its Change Date at October 4, 2027. The OpenTofu alpha goes live the same week.
• November 30, 2023: The OpenTofu 1.6.0 beta adds a public open-source registry.
• January 10, 2024: OpenTofu 1.6.0 reaches stable release and is ready for production.
• April 2024: HashiCorp sends OpenTofu a cease and desist alleging it incorporated BUSL-licensed code. OpenTofu denies it, saying the code originated in an MPL-licensed version.
• April 24, 2024: IBM announces its intent to acquire HashiCorp for $6.4 billion.
• April 30, 2024: OpenTofu 1.7 introduces state file encryption, the first significant feature Terraform did not have.
• February 27, 2025: IBM completes the acquisition.
• April 23, 2025: The CNCF accepts OpenTofu at Sandbox maturity, with the CNCF Governing Board granting an exception to its Apache 2.0 licensing policy.
• May 14, 2026: OpenTofu 1.12 ships.
• August 26, 2026: Terraform 1.16 ships.

The HashiCorp BUSL 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 who use Terraform. 

Here’s a glimpse into the likely outcomes:

Impact on Terraform end users

If you run Terraform against your own infrastructure, nothing changed and nothing will. That covers the large majority of Terraform users. Internal use is explicitly permitted, and the license names affiliates under common control as part of the same organization, so one division can host Terraform for another.

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 2023 change arrived without warning, and nothing stops the licensor from setting different terms on the next release.

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 BUSL 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 BUSL 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

The licensing FAQ states that the change does not affect partners building integrations, including Terraform providers, Vault plugins, and other product integrations. Partners can continue selling services on top of Terraform.

Organizations building competing products that integrate with these tools should contact IBM directly. BUSL does not permit competitors to use the free editions at no charge, but commercial licensing terms are available for use cases beyond the BUSL restrictions.

Impact on commercial customers of HashiCorp

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

Does the Terraform license change affect my company?

Many Terraform users do not fall into neat categories when it comes to whether the shift to BUSL 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 BUSL 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 BUSL license.

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

Following the HashiCorp BUSL 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. 

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 launched 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. 

OpenTofu is an MPL 2.0 fork of Terraform, governed by the Linux Foundation and a CNCF Sandbox project since April 2025. The current release is 1.12.6, shipped August 19, 2026. Most Terraform configurations run on it unchanged: same HCL, same state format, same provider protocol. Compatibility is strongest with Terraform 1.5-era state, so test one workspace before you move the rest.

The first stable release came in January 2024, under five months after the fork. Since then OpenTofu has shipped features Terraform does not have, starting with state file encryption in 1.7 and continuing through OCI registry support for modules and providers and native S3 state locking without DynamoDB.

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 the most recent OpenTofu versions), 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.

Three years on, the practical picture is settled. If you run Terraform against your own infrastructure, the license does not restrict you, and it will not start to. If you ship a product that hosts or embeds Terraform for paying third parties, you need a commercial agreement with IBM or a different tool.

If you are not sure which of those describes you, the test is whether you offer Terraform to third parties on a paid basis in a way that significantly overlaps with IBM’s paid Terraform products. Read the LICENSE file and the licensing FAQ, then take it to your counsel.

Teams that wanted out mostly went to OpenTofu, which forked from Terraform 1.5.7 and stays under MPL 2.0 with the Linux Foundation. Spacelift was a founding member of that effort and supports OpenTofu natively, alongside Terraform.