Programming

IBM's $6.4 Billion Gamble: A Wise Investment or a Blunder with HashiCorp Acquisition?

The Digital Artisan

May 10, 2024 — 1 min read

A $6.4 billion Surprise in the Tech World

In a shocking move, IBM has purchased HashiCorp, the infrastructure-as-code (IaC) tool Terraform's parent company, for a whopping $6.4 billion. Despite Terraform's popularity and its compatibility with Red Hat Ansible, doubts are surfacing about the wisdom of this acquisition.

HashiCorp's Infrastructure Goldmine

Terraform, HashiCorp's flagship product, enjoys a 32.02% market share in the configuration-management category, barely outdoing Ansible's 31.35%. Furthermore, the suite from HashiCorp, including its secrets manager Vault, virtual software development platform creator Vagrant, and machine image builder Packer, could complement the Red Hat line.

Fall From Open Source Grace

Despite all the potential benefits to IBM, there's a significant hitch. HashiCorp has recently abandoned its openness by switching from the Mozilla Public License (MPL) to the semi-proprietary Business Source License (BSL) for its programs. This has led to open-source forks such as OpenTofu and OpenBao, which have won over developers and customers.

The Perceived Blunder

With these open-source alternatives available at no-cost, IBM's decision to spend billions on acquiring HashiCorp's technology is highly questionable. Moreover, HashiCorp's recent controversial maneuvers have seen them lose favor among developers and customers, culminating in a record low stock value of $21.11, a 22% drop post-October 2023 earnings call. Post-acquisition, IBM also suffered an over 8% stock plunge.

Tech Community Weighs In

The tech community seems to agree that IBM's investment might be more of a blunder than a strategic move, given the market response so far. As this high-stakes bet plays out, only time will reveal the real winners and losers.

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