HashiCorp Is Standardizing and Industrializing the Cloud
HashiCorp had 20 employees in 2016 when CEO David McJannet joined the company. Today, the company has more than 2,000. There are some excellent reasons for that growth. HashiCorp takes a focused approach to infrastructure-as-code, identity, and services.
HashiCorp is industrializing the cloud. The company focuses on the concept because around 2015, it became apparent that an infrastructure transition had started. Much like prior infrastructure transitions — think the database, infrastructure, or app layer — a spending gap emerged. It led to architectural changes, such as the shift from physical to virtual machines.
McJannet used the database market as an example to show how new data sources disrupted the market. New technologies emerged, recasting how people viewed databases and the overall space.
For HashiCorp, the transition centered on the shift from virtualization to cloud infrastructure. It turned out that the compute infrastructure of the cloud and the ability to scale up and down led to a generational change that led to Amazon Web Services‘ clear domination.
In 2016, the big three cloud markets (AWS, Azure and Google Cloud Platform) represented $16 billion in revenues; today, it is a $160 billion market. And that does not include Alibaba, which McJannet says may arguably be larger than Google Cloud. The market is now growing at 35% to 40% clip. In McJannet’s view, we’re just at the beginning.
HashiCorp, at the epicenter of the shift, enables the transition to the cloud, McJannet said. The traditional categories associated with private data centers, physical machines, and enterprise software platforms will continue to get recast across the cloud.
Every company has essentially the same challenge. They all work with multiple cloud service providers. And all cloud service providers are built on the same premises: Infrastructure as Code (IaC), identity, and services.
And each cloud service provider has its own IaC, identity, and services infrastructure. It makes no sense for an enterprise to rely on each service provider and their unique environments for provisioning to the cloud, managing identity, and running services.
To serve the customers using multiple cloud services. HashiCorp builds on the concept of standardization, analogous to the standardization of HTML.
HashiCorp should be the VMware of the cloud era, according to HashiCorp CEO David McJannet.
“Does anybody doubt that was what made the market take off?” McJannet said rhetorically about HTML. “We did the same thing for our Terraform console. We set it up in open source to make our projects open source. But to be clear, they are 100% controlled by HashiCorp. Because we think good software design is made by small groups of people, But we allow people to contribute plugins that we then accept that allow us to drive standardization. So now there are 2000+ Terraform providers in the world, and there are hundreds of backends that are supported.”
In 2017, Azure standardized on Terraform, and the other major cloud service providers followed. The standardization model worked for them. The cloud service providers did not want to be in the provisioning market. They wanted to sell their core services.
“These are just the enabling things that allow people who adopt their tech, so someone in the market needs to play that role,” McJannet said. “And we decided that was us.”
Each HashiCorp product uses the same model. Terraform, Vault, Boundary, and Consul are all open source but with committers who all work internally at HashiCorp.
“We want to enable a consistent way to provision and secure connected infrastructure,” McJannet said. “We know you’re going to have different kinds of applications running on top. We want you to consider where to provision secure, connect — run it all. “Broadly speaking, you’ll see us aligned around this idea of enabling a cloud operating model, which is just this model of infrastructures as code, identity for security, and zero trust and services for networking.”
The HashiCorp approach has not changed since 2015, and it will not change for quite some time, McJannet said.
HashiCorp controls the experience. It uses open source to standardize markets, employing three themes:
- Drive proliferation among users.
- Enable the ecosystem to bring more workloads under management using its products.
- Give the customer the ability to run on a shared service under a centralized platform team.
“And that allows us to fund the model to make it go tighter and tighter and tighter,” McJannet said. “This has been the core strategy of how we build the business.”
HashiCorp maintains tight control over its open source projects. None of its products are part of a foundation.
“We employ all the committers to our tech,” McJannet said. “And that is something that is very, very important to the ecosystem.”
In essence, HashiCorp controls the developer experience, and they get to monetize the business themselves.
Terraform core, built on a graph database, solves a middleware problem. The core Terraform platform works with over 2,000 providers across cloud services, platforms and software vendors.
“For example, I want to create the template that configures for Amazon Web Services, plus the configuration of Datadog, plus the configuration of Palo Alto Networks, plus the configuration of Kubernetes on top of it,” McJannet said. “Now I can create a single TerraForm template that stands up the entire thing. So it’s essentially solving a middleware problem.”‘
HashiCorp uses the same approach as Vault, the security platform. It’s also true of HashiCorp Boundary, Consul, Nomad, Packet, and Waypoint.
The journey starts with Terraform. But that can get out of control pretty quickly. A customer may sign an enterprise agreement with AWS, and the developers adopt it quickly. Within six months, 400 Amazon accounts may be in use because Terraform is getting used to provision their services. The security team freaks out and the networking team declares they won’t allow the services to see traffic without the security team’s sign-off.
A platform team emerges from all of the first experiences that require developers to use pre-approved Terraform templates. This platform team sees the problems emerge, leading to the need for Vault. Issues with Vault lead to the need for Boundary, its identity-based service. Boundary’s use begets Consul, for service-to-service networking, and so on.
The HashiCorp Cloud Platform will take a while to grow into a significant part of the company’s story. That’s due to several reasons. Infrastructure software engineers manage, for the most part, brownfield environments.
“Some people like to compare the markets to each other,” McJannet said. “They will say Snowflake is growing at 100%, like MongoDB is growing at 100%. Surely you can grow that fast as well? ”
The infrastructure markets move much more like battleships, McJannet said. These are serious decisions people are making. In some cases, procurement will take 15 months.
HashiCorp is a young company. In its second quarter of 2022, HashiCorp did $114 million in revenues. But their success shows how a standardized open source model has provided it the ability to convince Global 2000 companies to adopt its products. Enterprise companies are not so fast to adopt cloud services in full. They still want to control their networks. Companies will get there, and when they will need industrial-grade tools.
There’s an important distinction to make about HashiCorp between its open source products and enterprise software grade tools. Customers start with the open source tools, but as they scale, they buy into the HashiCorp stack. HashiCorp’s open source tools lead to standardization. The HashiCorp stack results in industrialization for scaling.
HashiCorp’s approach shows the viability of open source in a way that is much different than the cloud native way. A cloud native open source project involves multiple companies building out the technology through a foundation structure. There may be a few winners but eventually, it is often one provider that becomes dominant.
The HashiCorp model gives the company total control over the developer experience, and there is no sharing in the market. That’s an open source model more companies may want to consider when standardizing and industrializing their sector of the cloud services market.