Terraform Cloud vs Open-Source Terraform is a hot topic among DevOps professionals and cloud engineers. In today’s cloud-driven world, Infrastructure as Code (IaC) has revolutionised the way IT professionals manage and scale infrastructure. It empowers teams to provision, manage, and version infrastructure in a repeatable and reliable way, reducing human error and speeding up deployments.
Among the most powerful IaC tools is Terraform by HashiCorp, known for its simplicity, extensibility, and cloud-agnostic capabilities. Whether you’re deploying on AWS, Azure, GCP, or multi-cloud, Terraform allows you to codify and automate your infrastructure with ease.
With the rise in popularity of Terraform Cloud and its open-source counterpart, many professionals find themselves stuck at a crossroads — Which version should I choose? In this guide, we’ll break down the differences and help you make the right decision based on your needs, team size, and infrastructure goals.
Whether you’re deploying your first Terraform example, studying for the HashiCorp Terraform certification, or working with large-scale enterprise environments, this article will help you decide by diving deep into both offerings.
In this article, we will cover:
- What is Terraform Cloud?
- What is Open-Source Terraform?
- Terraform Cloud vs. Open-Source Terraform: Overview
- Key Differences Between Terraform Cloud & Open-Source Terraform
- Use Cases for Terraform Cloud & Open-Source Terraform
- The Future of Terraform Cloud & Open-Source Terraform
- Conclusion
- FAQs
What is Terraform Cloud?
Terraform Cloud is a managed service provided by HashiCorp that simplifies the lifecycle of Terraform — from writing code to applying it — while focusing on collaboration, security, and automation.
Key Features of Terraform Cloud
- Remote state management with locking and versioning
- VCS (Version Control System) integration (GitHub, GitLab, Bitbucket)
- Secure variable storage
- Policy as Code with Sentinel
- Role-based access control
- Native support for CI/CD workflows
It’s part of the HashiCorp Cloud Platform, making it easier for teams to automate infrastructure with built-in guardrails.
Related Readings: Terraform Modules and Why You Should Use Them
What is Open-Source Terraform?
Open-Source Terraform is the CLI-based version of the Terraform software that you can run locally or in your self-hosted environment. It gives you full control over your infrastructure provisioning but leaves responsibility for automation, security, and collaboration on your shoulders.
Key Features of Open-Source Terraform
- Local and remote backend support
- Modular infrastructure provisioning
- Flexible integration with CI/CD tools like Jenkins, GitHub Actions
- Community-supported with a rich plugin ecosystem
Open-source Terraform is lightweight, flexible, and ideal for developers who love customising their workflows.
Related Readings: What is Infrastructure as Code (IAC)?
Terraform Cloud vs. Open-Source Terraform: An Overview
Let’s look at these two side by side:
| Feature | Terraform Cloud | Open-Source Terraform |
|---|---|---|
| Cost | Free + Paid Plans | Free |
| State Management | Remote, secure, automated | Manual or custom setup |
| Collaboration | Built-in user and role management | Git-based collaboration |
| Automation | Native with VCS triggers | External scripts or tools |
| Security & Policies | Built-in with Sentinel & RBAC | Manual setup required |
| Best For | Teams & Enterprises | Individuals & small teams |
Key Differences Between Terraform Cloud & Open-Source Terraform
1. Cost and Licensing
- Terraform Cloud offers a free tier, but advanced features such as policy enforcement and audit logs require paid plans.
- Open-source Terraform is completely free; however, the total cost of ownership can increase when you add third-party tools for features such as state management, collaboration, or security.
2. Collaboration and Role Management
- In Terraform Cloud, you can assign roles, manage users, and collaborate on runs easily.
- In Open-Source, you rely heavily on Git workflows and manual peer reviews.
3. State Management
- Terraform Cloud handles state securely with automatic backups and versioning.
- With Open-Source, you must configure state storage (e.g., S3, Azure Blob) and ensure that you lock yourself.
4. Automation
- Terraform Cloud supports automatic triggers via VCS integrations.
- Open-source requires scripting or integration with tools like Jenkins.
5. Security and Compliance
- Terraform Cloud comes with Sentinel for policy enforcement and secrets management.
- Open-source requires manual enforcement using external tools, such as Vault.
Use Cases for Terraform Cloud & Open-Source Terraform
When to Use Terraform Cloud
- You’re part of a team or a large organisation
- You need a built-in CI/CD and collaboration
- You require compliance and audit logs
- You want remote state storage without managing infrastructure
When to Use Open-Source Terraform
- You’re a solo developer or student
- You need complete customisation
- You work in air-gapped environments
- You want to save on costs for smaller projects
Related Readings: Terraform Certification 003: All you need to know
The Future of Terraform Cloud & Open-Source Terraform
After HashiCorp shifted Terraform to a Business Source License (BSL), it sparked discussions around open alternatives like OpenTofu. While Terraform Cloud continues to evolve under HashiCorp’s umbrella with enterprise features and integration into the broader HashiCorp Cloud Platform, the open-source community is responding with forks and new tools to maintain openness.
The future is heading toward diversified infrastructure platforms — whether through Terraform Cloud, self-hosted options, or community-driven tools.
Conclusion
Both Terraform Cloud and Open-Source Terraform are powerful, but they serve different purposes. If you’re managing enterprise-scale infrastructure, need strong team collaboration, and want security out of the box, Terraform Cloud is your best bet.
However, if you’re learning the ropes, working independently, or building custom pipelines, Open-Source Terraform gives you the freedom to build as you like.
At K21 Academy, we recommend evaluating your team size, workflow complexity, budget, and security requirements before choosing the right version.
FAQs
What is the difference between Terraform and Terraform Cloud?
Terraform is the CLI tool used to write and apply IaC configurations. Terraform Cloud is a SaaS platform that enhances Terraform with collaboration, automation, and remote state capabilities.
What is the difference between Terraform enterprise and Terraform open-source?
Terraform Enterprise is the self-hosted version of Terraform Cloud for large organisations, offering advanced security, governance, and custom workflows. Open-source Terraform lacks built-in collaboration and enterprise features.
What is the difference between Terraform Cloud and OpenTofu?
Terraform Cloud is a managed HashiCorp service. OpenTofu is a community-driven, open-source alternative that was created following the licensing changes made to Terraform.
What is the alternative to Terraform Cloud?
Alternatives include OpenTofu, Spacelift, env0, or building a custom self-hosted Terraform backend with tools like S3, Vault, and Jenkins.
Why are people moving away from Terraform?
Due to licensing changes and increasing reliance on proprietary features, many in the open-source community are exploring alternatives like OpenTofu that maintain full community control and transparency.
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