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IBM Acquires HashiCorp for $6.4B to Enhance Cloud Tools

IBM acquires HashiCorp for $6.4 billion to enhance multi-cloud management and automation capabilities.

By Alex P. Chase

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4/29, 20:54 EDT
International Business Machines Corporation
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Key Takeaway

  • IBM acquires HashiCorp for $6.4 billion to enhance cloud management offerings, marking its second-largest purchase.
  • The acquisition aims to address the complexity of managing multiple cloud platforms, leveraging HashiCorp's Terraform software.
  • Expected to close by end of 2024, the deal strengthens IBM's position against competitors and maintains HashiCorp as a separate division with no layoffs.

IBM Acquires HashiCorp

International Business Machines (IBM) has announced a significant acquisition of HashiCorp for $6.4 billion, marking IBM's second-largest purchase to date. This strategic move is aimed at enhancing IBM's capabilities in helping businesses automate and manage multiple cloud-computing platforms efficiently. Rob Thomas, IBM’s chief commercial officer and senior vice president of software, highlighted the increasing trend among IBM customers towards utilizing several cloud platforms, which has presented setup challenges. HashiCorp, known for its market leadership in cloud initiation services, has been identified as a key solution to these challenges, with many IBM customers already leveraging its services.

Cloud Management Automation

The acquisition underscores the growing complexity in managing multiple cloud platforms and data centers, especially as more applications, data, and generative AI-based tools become prevalent. Tim Armandpour, chief technology officer of PagerDuty, emphasized that HashiCorp's integration into IBM would accelerate companies' abilities to operate in these complex environments. HashiCorp, established in 2012 and based in San Francisco, gained popularity among developers for its open-source software Terraform, which automates the management of cloud platforms like Amazon Web Services and Microsoft Azure.

Strategic Implications for Cloud Computing

IBM's acquisition is seen as a strategic move to provide a comprehensive alternative to VMware’s virtualization products, according to Tim Crawford, a CIO strategic adviser. This acquisition, much like IBM's previous purchase of Red Hat for $34 billion, is aimed at strengthening IBM's position against cloud competitors through an open-source approach. The deal is also anticipated to offer stability for companies concerned about HashiCorp’s future, with Terraform playing a critical role in many IBM clients' strategies. Analysts, however, note the challenge IBM faces in maintaining distinct lines between Red Hat and HashiCorp's offerings, as both companies provide overlapping services in cloud and data center management.

Future Outlook and Conclusion

The acquisition is expected to close by the end of 2024, with HashiCorp retaining its name and the Terraform brand. The 2,200-person company will join IBM's software group as its own division, with no planned layoffs, indicating IBM's commitment to investing in HashiCorp's research and development. This move is part of IBM's broader strategy under CEO Arvind Krishna to bolster its software offerings, having closed 41 acquisitions since his appointment in 2020. The integration of HashiCorp into IBM's portfolio not only aims to enhance IBM's cloud management solutions but also leverages HashiCorp's significant developer following, promising to extend IBM's reach into enterprise IT departments globally.

Street Views

  • William Blair Analyst, Jason Ader (Neutral on HashiCorp):

    "Most large enterprises use it, but don’t pay for it."

Management Quotes

  • Rob Thomas, Chief Commercial Officer and Senior Vice President of Software at IBM:

    "Many IBM customers have shifted to using several cloud platforms rather than one... That is why the tech giant sought out HashiCorp." "IBM’s purchase of HashiCorp also offers stability for companies concerned about HashiCorp’s future. Terraform is a critical part of many IBM clients’ strategies."

  • Tim Armandpour, Chief Technology Officer of PagerDuty:

    "The acquisition of HashiCorp will accelerate companies’ ability to operate those complex environments."

  • Tim Crawford, CIO Strategic Adviser at Avoa:

    "For some CIOs, the combination of IBM’s cloud-computing platform, HashiCorp and Red Hat could provide an alternative to VMware’s virtualization products."

  • Suvajit Basu, CIO of Goya Foods:

    “This M&A issue is a big one with CIOs, especially with what is recently playing out with Broadcom and VMware.”

  • Armon Dadgar, Co-founder and Chief Technology Officer at HashiCorp:

    “IBM is already a vendor to most of the Fortune 2000...”