ARM templates are the native automation mechanism for the Azure cloud platform. It is possible to execute ARM templates from Terraform using resource azurerm_resource_group_template_deployment. To Azure professionals with less Terraform experience, this is appealing. It allows them to use their existing skills and provides some short-term productivity gains. While I see the benefit, the tactic eliminates some of the benefits of using Terraform.
Don't use Terraform to run ARM templates unless you absolutely have to. The template deployment resource represents an Azure Deployment, not the resources that deployment creates. For example, if you execute an ARM template that creates a VNet, Terraform will only understand changes made to the ARM template. Executing a Terraform plan will *not* report changes that will be affected to the underlying VNet. If somebody made a manual change to that VNet, Terraform will not sense the change and re-apply the ARM template.
Only use Terraform for ARM templates for new features that aren't in Terraform yet. This is rare, but it does happen. Microsoft enhancements are reflected in the REST APIs, and thus the ARM template schema, before enhancements are incorporated in the SDK. Once new features are in the SDK, they commonly are reflected in Terraform very quickly. But there are enhancements (e. g. the VWAN additions) that take months to be completely incorporated in the SDKs.
For example, at the time of this writing, Terraform resources do not yet exist for Virtual WAN VPN sites and VWAN VPN site-to-site connections. I recently used the template deployment resource to manage that infrastructure because there was no other choice from Terraform perspective.
Consider Terraform execution of ARM templates after Terraform resources exist for new features as technical debt. That is, once Terraform formally supports the resources you need, you should enhance your Terraform to remove the ARM templates. This makes your Terraform more consistent and allows you to identify configuration drift. As with all technical debt, the work should be properly scheduled in light of the team's other priorities. to use my previous example, the ARM templates used to manage VWAN VPN sites and connections should be refactored once Terraform resources exist for those constructs.
When an ARM template execution fails in Terraform, Terraform doesn't record the fact that the deployment was physically created in the state file. Consequently, to rerun the terraform ARM template after corrections, you either need to manually delete the Azure deployment, to do a Terraform import for that deployment to re-execute the Terraform configuration.
Some try to work around the deployment creation problem by generating unique deployment names: I consider this kludge paste. It creates a large number of deployments to sift through if you want to review details on an error. It also means that Terraform will re-run ARM templates unnecessarily when the configuration is executed.