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What is Terraform? Everything You Need to Know

Table of Contents

Key takeaway

Terraform is a cloud-agnostic Infrastructure as Code (IaC) tool that lets teams define, provision, and manage infrastructure using declarative code instead of manual setup. In this blog, you’ll learn what Terraform is, how it works, and when to use it. You’ll also explore its key components, use cases, and how it compares to other tools plus why OpenTofu has emerged as its open-source successor.

Terraform is one of the most popular tools in the modern DevOps toolkit. If you've ever wondered how large teams automate infrastructure provisioning or how you can deploy cloud environments using just code, you're in the right place.

This guide will walk through what Terraform is, how it works, when to use it, how it compares to other tools, and why OpenTofu is emerging as its open-source successor.

What is Terraform?

Terraform is an Infrastructure as Code (IaC) tool created by HashiCorp that allows you to define, provision, and manage your infrastructure using a declarative configuration language called HCL (HashiCorp Configuration Language).

With Terraform, you describe what your infrastructure should look like in .tf files, and Terraform figures out how to create and maintain that state for you whether it's on AWS, Azure, Google Cloud, on-premises, or across multiple providers.

What is Terraform Used For?

Terraform is used to:

Provision infrastructure (compute, storage, network, etc.)
Manage multi-cloud deployments
Automate CI/CD infrastructure setup
Standardize environment configurations across dev, test, and prod
Track changes to infrastructure like version-controlled source code
Build reproducible environments for disaster recovery or testing

What is Infrastructure as Code (IaC)?

Before Terraform, provisioning infrastructure involved manual clicks in cloud dashboards or hand-crafted shell scripts. IaC shifts this paradigm by enabling you to define infrastructure in code.

Benefits of IaC:

Repeatability: Environments can be reliably reproduced
Version control: Code can be tracked, reviewed, and rolled back
Automation: Infrastructure becomes part of CI/CD pipelines
Consistency: Reduces human error and configuration drift

How Does Terraform Work?

Terraform consists of two major components:

1. Terraform Core

A CLI-based binary that evaluates your configuration files
Manages execution plans, resource lifecycle, and state

2. Terraform Plugins

Enable Terraform to talk to cloud providers or platforms
Includes Providers (e.g., AWS, Azure) and Provisioners (e.g., local-exec)

Terraform Workflow:

Write: Define infrastructure using HCL
Init: Initialize working directory with terraform init
Plan: Generate execution plan with terraform plan
Apply: Create/update infrastructure with terraform apply

Key Components of Terraform

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Terraform Components Table

Component	Description
Providers	Plugins to interface with cloud APIs (e.g., AWS, Azure, Kubernetes)
Resources	The infrastructure components you manage (e.g., VM, S3 bucket)
Modules	Reusable, composable collections of Terraform configs
Variables	Inputs for dynamic configuration and environment flexibility
State File	Records the actual infrastructure and metadata terraform.tfstate
Workspaces	Used to manage multiple environments (dev, prod, etc.) with shared code
Data Sources	Fetch info about existing resources outside Terraform control

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Basic Terraform Example

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Terraform Use Cases

1. Spin Up and Tear Down Environments

Use Terraform to create temporary dev/test environments that mirror production, saving time and reducing manual setup errors.

2. Multi-Cloud Management

With one Terraform configuration, deploy infrastructure across AWS, GCP, and Azure avoiding vendor lock-in.

3. Complex Applications (N-tier)

Manage dependencies between backend databases, application servers, and frontend load balancers all in a single Terraform plan.

4. Kubernetes and PaaS Integration

Use Terraform to provision Kubernetes clusters and other platforms like Consul or Datadog through available providers.

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Terraform Security Best Practices

Avoid hardcoding secrets: Use Vault, AWS Secrets Manager, or encrypted remote state
Secure state storage: Store state in S3, Azure Blob, or Terraform Cloud with versioning and encryption
Static analysis: Integrate tools like tfsec, Checkov, or Terrascan
Use Policy as Code: Enforce guardrails with OPA or Sentinel
Audit everything: Enable logging and peer reviews for all changes

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Terraform vs Other Tools

Tools Comparison Table

Tool	Use Case	Limitations
CloudFormation	AWS-specific IaC	Locked to AWS
ARM Templates	Azure-specific	Verbose syntax
Chef / Puppet	Configuration management post-provisioning	Not ideal for provisioning
Kubernetes	Container orchestration	Needs infra underneath
Custom scripts	Quick & dirty	Hard to maintain at scale
Harness IaCM	Enterprise-grade IaC management	Newer ecosystem

Terraform stands out for being:

Cloud-agnostic
Modular & reusable
Declarative

Terraform's History and OpenTofu

Terraform launched in 2014 as an open-source project under MPL 2.0. In 2023, HashiCorp changed Terraform’s license to BSL 1.1, restricting certain commercial use.

In response, OpenTofu was born as a community-driven fork of Terraform under the Linux Foundation, maintaining MPL licensing.

Why Use OpenTofu Instead?

Truly open-source and free to use in any context
Maintained by a growing, diverse community
Backed by contributors across the Terraform ecosystem
Compatible with existing Terraform code and workflows

Summary: Why Use Terraform?

Terraform simplifies infrastructure management by turning manual tasks into declarative code. It works across cloud providers, promotes best practices in automation, and scales with your infrastructure needs.

Whether you're launching a side project or managing enterprise-scale cloud deployments, Terraform and increasingly, OpenTofu offer the flexibility, visibility, and power you need.