IBM doubles down on hybrid cloud with $6.4B HashiCorp acquisition

In a move that significantly bolsters its position in the cloud services market, IBM has announced it is acquiring HashiCorp, a multicloud infrastructure automation company, for $6.4 billion.

HashiCorp is known for its Terraform product, an infrastructure automation tool, which is considered an industry standard for infrastructure provisioning in hybrid and multicloud environments.

In the statement, the company said HashiCorp’s suite of products offers “enterprises with extensive Infrastructure Lifecycle Management and Security Lifecycle Management capabilities,” which enable businesses to automate their hybrid and multicloud environments. “Today’s announcement is a continuation of IBM’s deep focus and investment in hybrid cloud and AI, the two most transformational technologies for clients today.”

“This is a great acquisition for IBM to formally plug a big gap in the hybrid cloud market which includes Infrastructure Lifecycle Management as well as Security Lifecycle Management, as most enterprises’ primary focus remains on Application Lifecycle Management but not on the structural foundation driving the application,” said Neil Shah, VP for research and partner at Counterpoint Research.

“Since IBM’s software business has been on the rise in recent times and its consulting business is not doing that great, this (HashiCorp’s acquisition) makes a right fit there,” said Techarc’s chief analyst and founder, Faisal Kawoosa. “Every company is trying to see how AI can help automate processes> That is where I see this acquisition is fitting right into IBM’s scheme of things because IBM has a lot of AI-related order books already confirmed, so instead of getting into tool and applications development, the acquisition makes a good sense here.”

The deal is expected to close by the end of 2024, the statement added.

Addressing the challenge of hybrid cloud complexity

The complexity of managing multicloud and hybrid environments has become a daunting task for enterprises in recent times with the rise of cloud-native applications and generative AI (GenAI) deployments. The acquisition of HashiCorp by IBM fortifies IBM’s position in the rapidly growing AI and cloud computing market, two game-changing technologies shaping the future of how enterprises operate.

“Enterprise clients are wrestling with an unprecedented expansion in infrastructure and applications across public and private clouds, as well as on-prem environments. The global excitement surrounding generative AI has exacerbated these challenges and CIOs and developers are up against dramatic complexity in their tech strategies,” Arvind Krishna, IBM chairman and CEO, said in a press statement. “HashiCorp has a proven track record of enabling clients to manage the complexity of today’s infrastructure and application sprawl. Combining IBM’s portfolio and expertise with HashiCorp’s capabilities and talent will create a comprehensive hybrid cloud platform designed for the AI era.”

Managing the infrastructure lifecycle is often an afterthought or is assumed to be done by the systems integrator or the cloud infrastructure provider, Shah noted. “But it is becoming more and more complex for enterprises with variety and velocity of workloads in a hybrid cloud setting with different policies, security, troubleshooting, migrations, feature updates across clouds,” Shah said. He said with the onset of GenAI integrations, it would become even more complex and would need greater automation and policy management. “This is where IBM can gain an edge with HashiCorp’s capabilities and potential customers,” he added.

What IBM gains from HashiCorp acquisition

IBM’s acquisition of HashiCorp strengthens the company’s play in the hybrid cloud and DevOps market. HashiCorp’s well-regarded open source tools, particularly Terraform, bolster IBM’s portfolio and provide a path to attract a wider developer base, potentially fostering further innovation, said Prabhu Ram, head for Industry Intelligence Group at CyberMedia Research (CMR).

Combining IBM’s existing cloud solutions with HashiCorp’s infrastructure automation tools is expected to create a robust platform for managing hybrid and multi-cloud environments. “Our strategy at its core is about enabling companies to innovate in the cloud while providing a consistent approach to managing cloud at scale. The need for effective management and automation is critical with the rise of multi-cloud and hybrid cloud, which is being accelerated by today’s AI revolution,” Armon Dadgar, HashiCorp co-founder and chief technology officer, said in a statement.

Notably, HashiCorp’s multicloud focus aligns with the market’s increasing demand for flexibility, said CMR’s Ram backing the move. “By integrating these capabilities with its established customer base, IBM can create significant cross-selling opportunities. The combined entity positions IBM as a more comprehensive player in a fiercely competitive landscape, addressing the needs of both traditional infrastructure and emerging AI-driven workloads.”

Besides, the HashiCorp acquisition is also expected to accelerate growth for IBM in areas such as RedHat, watsonx, IT automation, and data security. “IBM has done well with RedHat acquisition and has maintained its independence and openness, and if it can follow the same with this acquisition without a hard upsell of its offerings, IBM can become a key open player in the hybrid cloud market,” Shah said.