Terraform BSL Overview: Limits and Opportunities for Users

Understanding Terraform’s New License: What You Can and Cannot Do Under the Business Source License (BSL)

HashiCorp’s Terraform has become the go-to Infrastructure-as-Code (IaC) tool used by countless organizations worldwide. Traditionally released under the open-source Mozilla Public License (MPL), Terraform recently shifted its license model to the Business Source License (BSL) 1.1 for newer versions. This change has caused some confusion, especially regarding what use cases are allowed — and what might be restricted — under the new license.

What Is the Business Source License (BSL)?

The BSL is a source-available license that allows users to access and modify the source code but comes with specific restrictions, primarily designed to protect HashiCorp’s commercial interests. Notably, the BSL generally allows use of Terraform for internal infrastructure automation but limits commercial uses where Terraform itself is a central offering.

Key Usage Restrictions Under the BSL

The main limitation under the BSL concerns providing Terraform (or derivative versions) as a hosted service to others without a commercial agreement. This means:

• If you offer Terraform as a service — for example, a SaaS platform or managed service where external customers can run Terraform workflows remotely — you would be violating the BSL unless you have a commercial license from HashiCorp.
• Similarly, embedding or reselling Terraform as part of a commercial SaaS product provided to customers also requires a commercial license.

These restrictions are aimed at preventing competitors or third parties from turning Terraform into a hosted product that competes with HashiCorp’s own Terraform Cloud offering without contributing back.

What Is Allowed?

For most organizations and individual users, the BSL remains permissive:

• Using Terraform internally, whether on-premises or in the cloud, to manage your infrastructure is fully allowed.
• Running Terraform locally on workstations or within CI/CD pipelines for your own infrastructure automation also remains unrestricted.
• Forking or modifying Terraform for internal use is allowed under the BSL terms.
• Open-source or personal projects using Terraform internally do not conflict with the BSL.

Do You Need to Switch or Worry?

If your usage is primarily internal infrastructure automation, you can continue using Terraform without issues. However, if you’re building a hosted Terraform service or integrating it into a commercial SaaS offering, you must contact HashiCorp for licensing or consider alternatives.

One popular alternative is OpenTofu, a community-driven, fully open-source fork of Terraform released under permissive licenses, offering an option free from hosted-use restrictions.

Conclusion

HashiCorp’s licensing change aims to protect their business model while still supporting internal Terraform users. Most organizations won’t need to change workflows but SaaS providers should review licensing carefully. For fully open-source alternatives without hosted service restrictions, projects like OpenTofu are gaining traction.

Understanding the BSL’s usage scenarios helps you stay compliant and make informed choices about your infrastructure tooling moving forward.