Your developer set up your app's servers, database and storage by clicking around in a cloud dashboard. Now he is leaving, and nobody else knows exactly what he built or how to rebuild it. Another developer has proposed "Terraform" to fix this, and you want to know what you would be agreeing to.
This guide answers what is Terraform in plain words. It covers what it does for you as the owner, how it protects you when people change, and the licence change of 2023 that you may hear about.
Quick answer
What is Terraform, in plain words?
Terraform is a tool that lets a developer write down your cloud setup in files, and then creates that setup for you. HashiCorp, which makes it, calls it "an infrastructure as code tool that lets you build, change, and version cloud and on-prem resources safely and efficiently". Cloud resources are the rented parts your software runs on, such as servers, databases and file storage.
Think of it as the architect's drawing for your building. Without a drawing, only the original builder knows where the pipes run. With one, any qualified builder can repair, extend or rebuild it.
What counts as infrastructure?
Infrastructure is everything your software needs besides the code itself. For example, the YUMI online store that The Beyond Horizon built keeps 18 content files on AWS S3 storage, and the site itself is hosted on Vercel. Each of those pieces has settings that someone chose, and those settings are what Terraform writes down.
What is infrastructure as code?
Infrastructure as code means your servers, databases and other cloud parts are described in text files instead of being set up by hand in a dashboard. The files can be saved, reviewed and reused like any other code. HashiCorp notes that because the setup is "written in a file, you can commit it to a Version Control System", which is a history of every change.
| Set up by hand in a dashboard | Infrastructure as code (Terraform) | |
| Record of what was built | In one person's memory | In written files |
| Rebuilding after a mistake | Slow, from memory | Run the files again |
| Who can change it | Whoever remembers the clicks | Any developer who can read the files |
| History of changes | Hard to see | Saved with each change |
How Terraform works, step by step
HashiCorp describes three stages. Your developer runs them, but it helps to know what each one means:
- Write: the developer describes the resources you need in Terraform files.
- Plan: Terraform shows a plan of what it "will create, update, or destroy". This is the moment to ask questions.
- Apply: Terraform makes the changes "in the correct order, respecting any resource dependencies".
Terraform also keeps a state file, which HashiCorp says "acts as a source of truth for your environment". It is Terraform's own record of what currently exists.
How Terraform protects you if a developer leaves
The biggest benefit for an owner is that your setup no longer lives in one person's head. When the files are stored in a code account your business owns, a new developer can read them and continue. Without them, you may pay someone to rediscover how your own system was built.
If you are planning business software, it helps to think about handover from the first week, not the last. You can read about The Beyond Horizon's custom software development for Indian businesses to see how that is planned.
Questions to ask before you approve Terraform
Knowing what is Terraform is half the job. The other half is asking the right questions before work starts, and getting the answers in writing.
- Will the Terraform files be stored in a code account registered to my business?
- Is the cloud account itself (for example on AWS or Google Cloud) in my company's name, with me as an owner?
- Where will the state file be stored, and who can open it?
- Will I see the plan before big changes are applied?
- Are we using Terraform or OpenTofu, and which version?
A warning about the state file
Keep this in mind: the state file can hold passwords in plain text. It must not sit on a developer's laptop or in a shared folder. HashiCorp's docs say state files can contain "sensitive values, such as initial database passwords or API tokens".
HashiCorp advises storing state remotely, encrypting it and limiting who can read it.
What changed with the Terraform licence in 2023?
On 10 August 2023, HashiCorp announced that future releases of its products would move from the open source Mozilla Public License 2.0 to the Business Source License 1.1. For Terraform, this applies to version 1.6.0 and later. Terraform 1.5.7, for example, was released under the Mozilla Public License.
Can your business still use Terraform?
Yes, for normal use. The licence file in Terraform's official code says "You may make production use of the Licensed Work". The exception is offering it to others in a way that competes with the paid version.
The file adds that "using the Licensed Work(s) for internal purposes within an organization is not considered a competitive offering".
So a shop, clinic or manufacturer using Terraform to run its own app is not the case the restriction targets. Companies that sell a paid service built on Terraform should read the licence and its FAQ with a lawyer.
Who owns Terraform now?
IBM announced on 27 February 2025 that it had completed its purchase of HashiCorp. Terraform's licence file now names IBM as the licensor. Each version under this licence also moves to the Mozilla Public License four years after it is published, according to the same file.
What is OpenTofu?
OpenTofu is an open source fork of Terraform. A fork is a separate copy of a project that then grows on its own. OpenTofu describes itself as "a drop-in replacement for Terraform" that is "under the Linux Foundation's stewardship", and its code is licensed under the Mozilla Public License 2.0.
The Linux Foundation announced OpenTofu on 20 September 2023, as a response to the licence change. For most businesses, the choice between Terraform and OpenTofu matters less than having the setup written down at all. Ask your developer why they picked one, and write the answer into the project notes.
Is Terraform like Docker or Kubernetes?
No, they do different jobs. Terraform creates the cloud parts your software runs on. Docker packs your software into containers, and Kubernetes, which its docs call "a portable, extensible, open source platform for managing containerized workloads and services", runs many containers across servers.
A project can use all three, or none. A small business app often needs only a simple hosting service, so ask what each tool adds before you pay for its setup.
A closing note
So, what is Terraform for you as an owner? It is a written plan for your cloud setup.
Its real value for an owner is that the plan belongs to you, sits in your account, and can be read by the next developer.
If a developer has proposed Terraform or OpenTofu and you want a plain second opinion, call or WhatsApp The Beyond Horizon on +91 75973 92744.