The following article explains What is Terraform and how it works.
As an infrastructure-as-code tool, it allows you to define, manage, and provision infrastructure resources such as servers, networks, and storage in a declarative way. Furthermore, it is open-source. Created by HashiCorp, Terraform manages resources across multiple cloud providers such as AWS, Azure, GCP, and others.
Terraform works by defining a desired state of infrastructure resources in a configuration file (in HashiCorp Configuration Language or JSON format) which specifies the resources to be created, their attributes and dependencies. Once the configuration file is created, Terraform uses providers to interact with the APIs of the cloud providers to create and manage the resources.
When you run Terraform, it first reads the configuration file, then it compares the desired state with the current state of the infrastructure and generates an execution plan to create, update or delete resources to match the desired state. Finally, Terraform applies the plan by making API calls to the cloud provider to create, update or delete resources as necessary. Terraform also maintains a state file that records the current state of the infrastructure, allowing Terraform to track changes and detect any drift between the desired and current states.
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