diff --git a/awx/api/serializers.py b/awx/api/serializers.py
index b3dfe8d226..3db78eb82c 100644
--- a/awx/api/serializers.py
+++ b/awx/api/serializers.py
@@ -1462,7 +1462,7 @@ class InventorySourceOptionsSerializer(BaseSerializer):
     class Meta:
         fields = ('*', 'source', 'source_path', 'source_script', 'source_vars', 'credential',
                   'source_regions', 'instance_filters', 'group_by', 'overwrite', 'overwrite_vars',
-                  'timeout')
+                  'timeout', 'verbosity')
 
     def get_related(self, obj):
         res = super(InventorySourceOptionsSerializer, self).get_related(obj)
diff --git a/awx/api/views.py b/awx/api/views.py
index cc7599db78..48f2e43632 100644
--- a/awx/api/views.py
+++ b/awx/api/views.py
@@ -2363,7 +2363,7 @@ class InventorySourceUpdateView(RetrieveAPIView):
 
     def post(self, request, *args, **kwargs):
         obj = self.get_object()
-        if obj.source == 'file' and obj.scm_project_id is not None:
+        if obj.source == 'scm':
             raise PermissionDenied(detail=_(
                 'Update the project `{}` in order to update this inventory source.'.format(
                     obj.scm_project.name)))
diff --git a/awx/main/management/commands/inventory_import.py b/awx/main/management/commands/inventory_import.py
index 7dc8a5f7bb..b61f4a64c9 100644
--- a/awx/main/management/commands/inventory_import.py
+++ b/awx/main/management/commands/inventory_import.py
@@ -2,32 +2,34 @@
 # All Rights Reserved.
 
 # Python
-import glob
 import json
 import logging
 from optparse import make_option
 import os
 import re
-import shlex
-import string
 import subprocess
 import sys
 import time
 import traceback
-
-# PyYAML
-import yaml
+import shutil
 
 # Django
 from django.conf import settings
 from django.core.management.base import NoArgsCommand, CommandError
+from django.core.exceptions import ImproperlyConfigured
 from django.db import connection, transaction
 from django.utils.encoding import smart_text
 
 # AWX
 from awx.main.models import * # noqa
 from awx.main.task_engine import TaskEnhancer
-from awx.main.utils import ignore_inventory_computed_fields, check_proot_installed, wrap_args_with_proot
+from awx.main.utils import (
+    ignore_inventory_computed_fields,
+    check_proot_installed,
+    wrap_args_with_proot,
+    build_proot_temp_dir
+)
+from awx.main.utils.mem_inventory import MemInventory, dict_to_mem_data
 from awx.main.signals import disable_activity_stream
 
 logger = logging.getLogger('awx.main.commands.inventory_import')
@@ -49,338 +51,111 @@ Demo mode free license count exceeded, would bring available instances to %(new_
 See http://www.ansible.com/renew for licensing information.'''
 
 
-class MemObject(object):
+def functioning_dir(path):
+    if os.path.isdir(path):
+        return path
+    return os.path.dirname(path)
+
+
+class AnsibleInventoryLoader(object):
     '''
-    Common code shared between in-memory groups and hosts.
+    Given executable `source` (directory, executable, or file) this will
+    use the ansible-inventory CLI utility to convert it into in-memory
+    representational objects. Example:
+        /usr/bin/ansible/ansible-inventory -i hosts --list
+    If it fails to find this, it uses the backported script instead
     '''
 
-    def __init__(self, name, source_dir):
-        assert name, 'no name'
-        assert source_dir, 'no source dir'
-        self.name = name
-        self.source_dir = source_dir
-
-    def load_vars(self, base_path):
-        all_vars = {}
-        files_found = 0
-        for suffix in ('', '.yml', '.yaml', '.json'):
-            path = ''.join([base_path, suffix]).encode("utf-8")
-            if not os.path.exists(path):
-                continue
-            if not os.path.isfile(path):
-                continue
-            files_found += 1
-            if files_found > 1:
-                raise RuntimeError('Multiple variable files found. There should only be one. %s ' % self.name)
-            vars_name = os.path.basename(os.path.dirname(path))
-            logger.debug('Loading %s from %s', vars_name, path)
-            try:
-                v = yaml.safe_load(file(path, 'r').read())
-                if hasattr(v, 'items'): # is a dict
-                    all_vars.update(v)
-            except yaml.YAMLError as e:
-                if hasattr(e, 'problem_mark'):
-                    logger.error('Invalid YAML in %s:%s col %s', path,
-                                 e.problem_mark.line + 1,
-                                 e.problem_mark.column + 1)
-                else:
-                    logger.error('Error loading YAML from %s', path)
-                raise
-        return all_vars
-
-
-class MemGroup(MemObject):
-    '''
-    In-memory representation of an inventory group.
-    '''
-
-    def __init__(self, name, source_dir):
-        super(MemGroup, self).__init__(name, source_dir)
-        self.children = []
-        self.hosts = []
-        self.variables = {}
-        self.parents = []
-        # Used on the "all" group in place of previous global variables.
-        # maps host and group names to hosts to prevent redudant additions
-        self.all_hosts = {}
-        self.all_groups = {}
-        group_vars = os.path.join(source_dir, 'group_vars', self.name)
-        self.variables = self.load_vars(group_vars)
-        logger.debug('Loaded group: %s', self.name)
-
-    def child_group_by_name(self, name, loader):
-        if name == 'all':
-            return
-        logger.debug('Looking for %s as child group of %s', name, self.name)
-        # slight hack here, passing in 'self' for all_group but child=True won't use it
-        group = loader.get_group(name, self, child=True)
-        if group:
-            # don't add to child groups if already there
-            for g in self.children:
-                if g.name == name:
-                    return g
-            logger.debug('Adding child group %s to group %s', group.name, self.name)
-            self.children.append(group)
-        return group
-
-    def add_child_group(self, group):
-        assert group.name is not 'all', 'group name is all'
-        assert isinstance(group, MemGroup), 'not MemGroup instance'
-        logger.debug('Adding child group %s to parent %s', group.name, self.name)
-        if group not in self.children:
-            self.children.append(group)
-        if self not in group.parents:
-            group.parents.append(self)
-
-    def add_host(self, host):
-        assert isinstance(host, MemHost), 'not MemHost instance'
-        logger.debug('Adding host %s to group %s', host.name, self.name)
-        if host not in self.hosts:
-            self.hosts.append(host)
-
-    def debug_tree(self, group_names=None):
-        group_names = group_names or set()
-        if self.name in group_names:
-            return
-        logger.debug('Dumping tree for group "%s":', self.name)
-        logger.debug('- Vars: %r', self.variables)
-        for h in self.hosts:
-            logger.debug('- Host: %s, %r',  h.name, h.variables)
-        for g in self.children:
-            logger.debug('- Child: %s', g.name)
-        logger.debug('----')
-        group_names.add(self.name)
-        for g in self.children:
-            g.debug_tree(group_names)
-
-
-class MemHost(MemObject):
-    '''
-    In-memory representation of an inventory host.
-    '''
-
-    def __init__(self, name, source_dir, port=None):
-        super(MemHost, self).__init__(name, source_dir)
-        self.variables = {}
-        self.instance_id = None
-        self.name = name
-        if port:
-            self.variables['ansible_ssh_port'] = port
-        host_vars = os.path.join(source_dir, 'host_vars', name)
-        self.variables.update(self.load_vars(host_vars))
-        logger.debug('Loaded host: %s', self.name)
-
-
-class BaseLoader(object):
-    '''
-    Common functions for an inventory loader from a given source.
-    '''
-
-    def __init__(self, source, all_group=None, group_filter_re=None, host_filter_re=None, is_custom=False):
+    def __init__(self, source, group_filter_re=None, host_filter_re=None, is_custom=False):
         self.source = source
-        self.source_dir = os.path.dirname(self.source)
-        self.all_group = all_group or MemGroup('all', self.source_dir)
+        self.is_custom = is_custom
+        self.tmp_private_dir = None
+        self.method = 'ansible-inventory'
         self.group_filter_re = group_filter_re
         self.host_filter_re = host_filter_re
-        self.ipv6_port_re = re.compile(r'^\[([A-Fa-f0-9:]{3,})\]:(\d+?)$')
-        self.is_custom = is_custom
 
-    def get_host(self, name):
-        '''
-        Return a MemHost instance from host name, creating if needed.  If name
-        contains brackets, they will NOT be interpreted as a host pattern.
-        '''
-        m = self.ipv6_port_re.match(name)
-        if m:
-            host_name = m.groups()[0]
-            port = int(m.groups()[1])
-        elif name.count(':') == 1:
-            host_name = name.split(':')[0]
-            try:
-                port = int(name.split(':')[1])
-            except (ValueError, UnicodeDecodeError):
-                logger.warning(u'Invalid port "%s" for host "%s"',
-                               name.split(':')[1], host_name)
-                port = None
+    def build_env(self):
+        # Use ansible venv if it's available and setup to use
+        env = dict(os.environ.items())
+        if settings.ANSIBLE_USE_VENV:
+            env['VIRTUAL_ENV'] = settings.ANSIBLE_VENV_PATH
+            env['PATH'] = os.path.join(settings.ANSIBLE_VENV_PATH, "bin") + ":" + env['PATH']
+            venv_libdir = os.path.join(settings.ANSIBLE_VENV_PATH, "lib")
+            env.pop('PYTHONPATH', None)  # default to none if no python_ver matches
+            for python_ver in ["python2.7", "python2.6"]:
+                if os.path.isdir(os.path.join(venv_libdir, python_ver)):
+                    env['PYTHONPATH'] = os.path.join(venv_libdir, python_ver, "site-packages") + ":"
+                    break
+        return env
+
+    def get_base_args(self):
+        # get ansible-inventory absolute path for running in bubblewrap/proot, in Popen
+        for path in os.environ["PATH"].split(os.pathsep):
+            potential_path = os.path.join(path.strip('"'), 'ansible-inventory')
+            if os.path.isfile(potential_path) and os.access(potential_path, os.X_OK):
+                return [potential_path, '-i', self.source]
+
+        # ansible-inventory was not found, look for backported module
+        abs_module_path = os.path.abspath(os.path.join(
+            os.path.dirname(__file__), '..', '..', '..', 'plugins',
+            'ansible_inventory', 'backport.py'))
+        self.method = 'ansible-inventory backport'
+
+        if not os.path.exists(abs_module_path):
+            raise ImproperlyConfigured('Can not find inventory module')
+        return [abs_module_path, '-i', self.source]
+
+    def get_proot_args(self, cmd, env):
+        source_dir = functioning_dir(self.source)
+        cwd = os.getcwd()
+        if not check_proot_installed():
+            raise RuntimeError("proot is not installed but is configured for use")
+
+        kwargs = {}
+        if self.is_custom:
+            # use source's tmp dir for proot, task manager will delete folder
+            logger.debug("Using provided directory '{}' for isolation.".format(source_dir))
+            kwargs['proot_temp_dir'] = source_dir
+            cwd = source_dir
         else:
-            host_name = name
-            port = None
-        if self.host_filter_re and not self.host_filter_re.match(host_name):
-            logger.debug('Filtering host %s', host_name)
-            return None
-        host = None
-        if host_name not in self.all_group.all_hosts:
-            host = MemHost(host_name, self.source_dir, port)
-            self.all_group.all_hosts[host_name] = host
-        return self.all_group.all_hosts[host_name]
+            # we can not safely store tmp data in source dir or trust script contents
+            if env['AWX_PRIVATE_DATA_DIR']:
+                # If this is non-blank, file credentials are being used and we need access
+                private_data_dir = functioning_dir(env['AWX_PRIVATE_DATA_DIR'])
+                logger.debug("Using private credential data in '{}'.".format(private_data_dir))
+                kwargs['private_data_dir'] = private_data_dir
+            self.tmp_private_dir = build_proot_temp_dir()
+            logger.debug("Using fresh temporary directory '{}' for isolation.".format(self.tmp_private_dir))
+            kwargs['proot_temp_dir'] = self.tmp_private_dir
+            # Run from source's location so that custom script contents are in `show_paths`
+            cwd = functioning_dir(self.source)
+        logger.debug("Running from `{}` working directory.".format(cwd))
 
-    def get_hosts(self, name):
-        '''
-        Return iterator over one or more MemHost instances from host name or
-        host pattern.
-        '''
-        def iternest(*args):
-            if args:
-                for i in args[0]:
-                    for j in iternest(*args[1:]):
-                        yield ''.join([str(i), j])
-            else:
-                yield ''
-        if self.ipv6_port_re.match(name):
-            yield self.get_host(name)
-            return
-        pattern_re = re.compile(r'(\[(?:(?:\d+\:\d+)|(?:[A-Za-z]\:[A-Za-z]))(?:\:\d+)??\])')
-        iters = []
-        for s in re.split(pattern_re, name):
-            if re.match(pattern_re, s):
-                start, end, step = (s[1:-1] + ':1').split(':')[:3]
-                mapfunc = str
-                if start in string.ascii_letters:
-                    istart = string.ascii_letters.index(start)
-                    iend = string.ascii_letters.index(end) + 1
-                    if istart >= iend:
-                        raise ValueError('invalid host range specified')
-                    seq = string.ascii_letters[istart:iend:int(step)]
-                else:
-                    if start[0] == '0' and len(start) > 1:
-                        if len(start) != len(end):
-                            raise ValueError('invalid host range specified')
-                        mapfunc = lambda x: str(x).zfill(len(start))
-                    seq = xrange(int(start), int(end) + 1, int(step))
-                iters.append(map(mapfunc, seq))
-            elif re.search(r'[\[\]]', s):
-                raise ValueError('invalid host range specified')
-            elif s:
-                iters.append([s])
-        for iname in iternest(*iters):
-            yield self.get_host(iname)
-
-    def get_group(self, name, all_group=None, child=False):
-        '''
-        Return a MemGroup instance from group name, creating if needed.
-        '''
-        all_group = all_group or self.all_group
-        if name == 'all':
-            return all_group
-        if self.group_filter_re and not self.group_filter_re.match(name):
-            logger.debug('Filtering group %s', name)
-            return None
-        if name not in self.all_group.all_groups:
-            group = MemGroup(name, self.source_dir)
-            if not child:
-                all_group.add_child_group(group)
-            self.all_group.all_groups[name] = group
-        return self.all_group.all_groups[name]
-
-    def load(self):
-        raise NotImplementedError
-
-
-class IniLoader(BaseLoader):
-    '''
-    Loader to read inventory from an INI-formatted text file.
-    '''
-
-    def load(self):
-        logger.info('Reading INI source: %s', self.source)
-        group = self.all_group
-        input_mode = 'host'
-        for line in file(self.source, 'r'):
-            line = line.split('#')[0].strip()
-            if not line:
-                continue
-            elif line.startswith('[') and line.endswith(']'):
-                # Mode change, possible new group name
-                line = line[1:-1].strip()
-                if line.endswith(':vars'):
-                    input_mode = 'vars'
-                    line = line[:-5]
-                elif line.endswith(':children'):
-                    input_mode = 'children'
-                    line = line[:-9]
-                else:
-                    input_mode = 'host'
-                group = self.get_group(line)
-            elif group:
-                # If group is None, we are skipping this group and shouldn't
-                # capture any children/variables/hosts under it.
-                # Add hosts with inline variables, or variables/children to
-                # an existing group.
-                tokens = shlex.split(line)
-                if input_mode == 'host':
-                    for host in self.get_hosts(tokens[0]):
-                        if not host:
-                            continue
-                        if len(tokens) > 1:
-                            for t in tokens[1:]:
-                                k,v = t.split('=', 1)
-                                host.variables[k] = v
-                        group.add_host(host)
-                elif input_mode == 'children':
-                    group.child_group_by_name(line, self)
-                elif input_mode == 'vars':
-                    for t in tokens:
-                        k, v = t.split('=', 1)
-                        group.variables[k] = v
-            # TODO: expansion patterns are probably not going to be supported.  YES THEY ARE!
-
-
-# from API documentation:
-#
-# if called with --list, inventory outputs like so:
-#
-# {
-#    "databases"   : {
-#        "hosts"   : [ "host1.example.com", "host2.example.com" ],
-#        "vars"    : {
-#            "a"   : true
-#        }
-#    },
-#    "webservers"  : [ "host2.example.com", "host3.example.com" ],
-#    "atlanta"     : {
-#        "hosts"   : [ "host1.example.com", "host4.example.com", "host5.example.com" ],
-#        "vars"    : {
-#            "b"   : false
-#        },
-#        "children": [ "marietta", "5points" ],
-#    },
-#    "marietta"    : [ "host6.example.com" ],
-#    "5points"     : [ "host7.example.com" ]
-# }
-#
-# if called with --host <host_record_name> outputs JSON for that host
-
-
-class ExecutableJsonLoader(BaseLoader):
+        return wrap_args_with_proot(cmd, cwd, **kwargs)
 
     def command_to_json(self, cmd):
         data = {}
         stdout, stderr = '', ''
-        try:
-            if self.is_custom and getattr(settings, 'AWX_PROOT_ENABLED', False):
-                if not check_proot_installed():
-                    raise RuntimeError("proot is not installed but is configured for use")
-                kwargs = {'proot_temp_dir': self.source_dir} # TODO: Remove proot dir
-                cmd = wrap_args_with_proot(cmd, self.source_dir, **kwargs)
-            # Use ansible venv if it's available and setup to use
-            env = dict(os.environ.items())
-            if settings.ANSIBLE_USE_VENV:
-                env['VIRTUAL_ENV'] = settings.ANSIBLE_VENV_PATH
-                env['PATH'] = os.path.join(settings.ANSIBLE_VENV_PATH, "bin") + ":" + env['PATH']
-                venv_libdir = os.path.join(settings.ANSIBLE_VENV_PATH, "lib")
-                env.pop('PYTHONPATH', None)  # default to none if no python_ver matches
-                for python_ver in ["python2.7", "python2.6"]:
-                    if os.path.isdir(os.path.join(venv_libdir, python_ver)):
-                        env['PYTHONPATH'] = os.path.join(venv_libdir, python_ver, "site-packages") + ":"
-                        break
+        env = self.build_env()
 
-            proc = subprocess.Popen(cmd, stdout=subprocess.PIPE, stderr=subprocess.PIPE, env=env)
-            stdout, stderr = proc.communicate()
-            if proc.returncode != 0:
-                raise RuntimeError('%r failed (rc=%d) with output: %s' % (cmd, proc.returncode, stderr))
-            try:
-                data = json.loads(stdout)
-            except ValueError:
+        if ((self.is_custom or 'AWX_PRIVATE_DATA_DIR' in env) and
+                getattr(settings, 'AWX_PROOT_ENABLED', False)):
+            cmd = self.get_proot_args(cmd, env)
+
+        proc = subprocess.Popen(cmd, stdout=subprocess.PIPE, stderr=subprocess.PIPE, env=env)
+        stdout, stderr = proc.communicate()
+
+        if self.tmp_private_dir:
+            shutil.rmtree(self.tmp_private_dir, True)
+        if proc.returncode != 0:
+            raise RuntimeError('%s failed (rc=%d) with output:\n%s' % (self.method, proc.returncode, stderr))
+        elif 'file not found' in stderr:
+            # File not visible to inventory module due proot (exit code 0, Ansible behavior)
+            raise IOError('Inventory module failed to find source {} with output:\n{}.'.format(self.source, stderr))
+
+        try:
+            data = json.loads(stdout)
+            if not isinstance(data, dict):
                 raise TypeError('Returned JSON must be a dictionary, got %s instead' % str(type(data)))
         except:
             logger.error('Failed to load JSON from: %s', stdout)
@@ -388,93 +163,21 @@ class ExecutableJsonLoader(BaseLoader):
         return data
 
     def load(self):
-        logger.info('Reading executable JSON source: %s', self.source)
-        data = self.command_to_json([self.source, '--list'])
-        _meta = data.pop('_meta', {})
+        base_args = self.get_base_args()
+        logger.info('Reading Ansible inventory source: %s', self.source)
+        data = self.command_to_json(base_args + ['--list'])
 
-        for k,v in data.iteritems():
-            group = self.get_group(k)
-            if not group:
-                continue
+        logger.info('Processing JSON output...')
+        inventory = MemInventory(
+            group_filter_re=self.group_filter_re, host_filter_re=self.host_filter_re)
+        inventory = dict_to_mem_data(data, inventory=inventory)
 
-            # Load group hosts/vars/children from a dictionary.
-            if isinstance(v, dict):
-                # Process hosts within a group.
-                hosts = v.get('hosts', {})
-                if isinstance(hosts, dict):
-                    for hk, hv in hosts.iteritems():
-                        host = self.get_host(hk)
-                        if not host:
-                            continue
-                        if isinstance(hv, dict):
-                            host.variables.update(hv)
-                        else:
-                            self.logger.warning('Expected dict of vars for '
-                                                'host "%s", got %s instead',
-                                                hk, str(type(hv)))
-                        group.add_host(host)
-                elif isinstance(hosts, (list, tuple)):
-                    for hk in hosts:
-                        host = self.get_host(hk)
-                        if not host:
-                            continue
-                        group.add_host(host)
-                else:
-                    logger.warning('Expected dict or list of "hosts" for '
-                                   'group "%s", got %s instead', k,
-                                   str(type(hosts)))
-                # Process group variables.
-                vars = v.get('vars', {})
-                if isinstance(vars, dict):
-                    group.variables.update(vars)
-                else:
-                    self.logger.warning('Expected dict of vars for '
-                                        'group "%s", got %s instead',
-                                        k, str(type(vars)))
-                # Process child groups.
-                children = v.get('children', [])
-                if isinstance(children, (list, tuple)):
-                    for c in children:
-                        child = self.get_group(c, self.all_group, child=True)
-                        if child:
-                            group.add_child_group(child)
-                else:
-                    self.logger.warning('Expected list of children for '
-                                        'group "%s", got %s instead',
-                                        k, str(type(children)))
-
-            # Load host names from a list.
-            elif isinstance(v, (list, tuple)):
-                for h in v:
-                    host = self.get_host(h)
-                    if not host:
-                        continue
-                    group.add_host(host)
-            else:
-                logger.warning('')
-                self.logger.warning('Expected dict or list for group "%s", '
-                                    'got %s instead', k, str(type(v)))
-
-            if k != 'all':
-                self.all_group.add_child_group(group)
-
-        # Invoke the executable once for each host name we've built up
-        # to set their variables
-        for k,v in self.all_group.all_hosts.iteritems():
-            if 'hostvars' not in _meta:
-                data = self.command_to_json([self.source, '--host', k.encode("utf-8")])
-            else:
-                data = _meta['hostvars'].get(k, {})
-            if isinstance(data, dict):
-                v.variables.update(data)
-            else:
-                self.logger.warning('Expected dict of vars for '
-                                    'host "%s", got %s instead',
-                                    k, str(type(data)))
+        return inventory
 
 
-def load_inventory_source(source, all_group=None, group_filter_re=None,
-                          host_filter_re=None, exclude_empty_groups=False, is_custom=False):
+def load_inventory_source(source, group_filter_re=None,
+                          host_filter_re=None, exclude_empty_groups=False,
+                          is_custom=False):
     '''
     Load inventory from given source directory or file.
     '''
@@ -483,41 +186,25 @@ def load_inventory_source(source, all_group=None, group_filter_re=None,
     source = source.replace('azure.py', 'windows_azure.py')
     source = source.replace('satellite6.py', 'foreman.py')
     source = source.replace('vmware.py', 'vmware_inventory.py')
-    logger.debug('Analyzing type of source: %s', source)
-    original_all_group = all_group
     if not os.path.exists(source):
         raise IOError('Source does not exist: %s' % source)
     source = os.path.join(os.getcwd(), os.path.dirname(source),
                           os.path.basename(source))
     source = os.path.normpath(os.path.abspath(source))
-    if os.path.isdir(source):
-        all_group = all_group or MemGroup('all', source)
-        for filename in glob.glob(os.path.join(source, '*')):
-            if filename.endswith(".ini") or os.path.isdir(filename):
-                continue
-            load_inventory_source(filename, all_group, group_filter_re,
-                                  host_filter_re, is_custom=is_custom)
-    else:
-        all_group = all_group or MemGroup('all', os.path.dirname(source))
-        if os.access(source, os.X_OK):
-            ExecutableJsonLoader(source, all_group, group_filter_re, host_filter_re, is_custom).load()
-        else:
-            IniLoader(source, all_group, group_filter_re, host_filter_re).load()
+
+    inventory = AnsibleInventoryLoader(
+        source=source,
+        group_filter_re=group_filter_re,
+        host_filter_re=host_filter_re,
+        is_custom=is_custom).load()
 
     logger.debug('Finished loading from source: %s', source)
     # Exclude groups that are completely empty.
-    if original_all_group is None and exclude_empty_groups:
-        for name, group in all_group.all_groups.items():
-            if not group.children and not group.hosts and not group.variables:
-                logger.debug('Removing empty group %s', name)
-                for parent in group.parents:
-                    if group in parent.children:
-                        parent.children.remove(group)
-                del all_group.all_groups[name]
-    if original_all_group is None:
-        logger.info('Loaded %d groups, %d hosts', len(all_group.all_groups),
-                    len(all_group.all_hosts))
-    return all_group
+    if exclude_empty_groups:
+        inventory.delete_empty_groups()
+    logger.info('Loaded %d groups, %d hosts', len(inventory.all_group.all_groups),
+                len(inventory.all_group.all_hosts))
+    return inventory.all_group
 
 
 class Command(NoArgsCommand):
@@ -573,22 +260,10 @@ class Command(NoArgsCommand):
                     'specified as "foo.bar" to traverse nested dicts.'),
     )
 
-    def init_logging(self):
+    def set_logging_level(self):
         log_levels = dict(enumerate([logging.WARNING, logging.INFO,
                                      logging.DEBUG, 0]))
-        self.logger = logging.getLogger('awx.main.commands.inventory_import')
-        self.logger.setLevel(log_levels.get(self.verbosity, 0))
-        handler = logging.StreamHandler()
-
-        class Formatter(logging.Formatter):
-            def format(self, record):
-                record.relativeSeconds = record.relativeCreated / 1000.0
-                return logging.Formatter.format(self, record)
-
-        formatter = Formatter('%(relativeSeconds)9.3f %(levelname)-8s %(message)s')
-        handler.setFormatter(formatter)
-        self.logger.addHandler(handler)
-        self.logger.propagate = False
+        logger.setLevel(log_levels.get(self.verbosity, 0))
 
     def _get_instance_id(self, from_dict, default=''):
         '''
@@ -650,8 +325,8 @@ class Command(NoArgsCommand):
             raise CommandError('Inventory with %s = %s cannot be found' % q.items()[0])
         except Inventory.MultipleObjectsReturned:
             raise CommandError('Inventory with %s = %s returned multiple results' % q.items()[0])
-        self.logger.info('Updating inventory %d: %s' % (self.inventory.pk,
-                                                        self.inventory.name))
+        logger.info('Updating inventory %d: %s' % (self.inventory.pk,
+                                                   self.inventory.name))
 
         # Load inventory source if specified via environment variable (when
         # inventory_import is called from an InventoryUpdate task).
@@ -727,8 +402,8 @@ class Command(NoArgsCommand):
             for mem_host in self.all_group.all_hosts.values():
                 instance_id = self._get_instance_id(mem_host.variables)
                 if not instance_id:
-                    self.logger.warning('Host "%s" has no "%s" variable',
-                                        mem_host.name, self.instance_id_var)
+                    logger.warning('Host "%s" has no "%s" variable',
+                                   mem_host.name, self.instance_id_var)
                     continue
                 mem_host.instance_id = instance_id
                 self.mem_instance_id_map[instance_id] = mem_host.name
@@ -768,11 +443,11 @@ class Command(NoArgsCommand):
             for host in hosts_qs.filter(pk__in=del_pks):
                 host_name = host.name
                 host.delete()
-                self.logger.info('Deleted host "%s"', host_name)
+                logger.info('Deleted host "%s"', host_name)
         if settings.SQL_DEBUG:
-            self.logger.warning('host deletions took %d queries for %d hosts',
-                                len(connection.queries) - queries_before,
-                                len(all_del_pks))
+            logger.warning('host deletions took %d queries for %d hosts',
+                           len(connection.queries) - queries_before,
+                           len(all_del_pks))
 
     def _delete_groups(self):
         '''
@@ -799,11 +474,11 @@ class Command(NoArgsCommand):
                 group_name = group.name
                 with ignore_inventory_computed_fields():
                     group.delete()
-                self.logger.info('Group "%s" deleted', group_name)
+                logger.info('Group "%s" deleted', group_name)
         if settings.SQL_DEBUG:
-            self.logger.warning('group deletions took %d queries for %d groups',
-                                len(connection.queries) - queries_before,
-                                len(all_del_pks))
+            logger.warning('group deletions took %d queries for %d groups',
+                           len(connection.queries) - queries_before,
+                           len(all_del_pks))
 
     def _delete_group_children_and_hosts(self):
         '''
@@ -831,8 +506,8 @@ class Command(NoArgsCommand):
                 for db_child in db_children.filter(pk__in=child_group_pks):
                     group_group_count += 1
                     db_group.children.remove(db_child)
-                    self.logger.info('Group "%s" removed from group "%s"',
-                                     db_child.name, db_group.name)
+                    logger.info('Group "%s" removed from group "%s"',
+                                db_child.name, db_group.name)
             # FIXME: Inventory source group relationships
             # Delete group/host relationships not present in imported data.
             db_hosts = db_group.hosts
@@ -859,12 +534,12 @@ class Command(NoArgsCommand):
                     if db_host not in db_group.hosts.all():
                         continue
                     db_group.hosts.remove(db_host)
-                    self.logger.info('Host "%s" removed from group "%s"',
-                                     db_host.name, db_group.name)
+                    logger.info('Host "%s" removed from group "%s"',
+                                db_host.name, db_group.name)
         if settings.SQL_DEBUG:
-            self.logger.warning('group-group and group-host deletions took %d queries for %d relationships',
-                                len(connection.queries) - queries_before,
-                                group_group_count + group_host_count)
+            logger.warning('group-group and group-host deletions took %d queries for %d relationships',
+                           len(connection.queries) - queries_before,
+                           group_group_count + group_host_count)
 
     def _update_inventory(self):
         '''
@@ -884,11 +559,11 @@ class Command(NoArgsCommand):
             all_obj.variables = json.dumps(db_variables)
             all_obj.save(update_fields=['variables'])
             if self.overwrite_vars:
-                self.logger.info('%s variables replaced from "all" group', all_name.capitalize())
+                logger.info('%s variables replaced from "all" group', all_name.capitalize())
             else:
-                self.logger.info('%s variables updated from "all" group', all_name.capitalize())
+                logger.info('%s variables updated from "all" group', all_name.capitalize())
         else:
-            self.logger.info('%s variables unmodified', all_name.capitalize())
+            logger.info('%s variables unmodified', all_name.capitalize())
 
     def _create_update_groups(self):
         '''
@@ -920,11 +595,11 @@ class Command(NoArgsCommand):
                     group.variables = json.dumps(db_variables)
                     group.save(update_fields=['variables'])
                     if self.overwrite_vars:
-                        self.logger.info('Group "%s" variables replaced', group.name)
+                        logger.info('Group "%s" variables replaced', group.name)
                     else:
-                        self.logger.info('Group "%s" variables updated', group.name)
+                        logger.info('Group "%s" variables updated', group.name)
                 else:
-                    self.logger.info('Group "%s" variables unmodified', group.name)
+                    logger.info('Group "%s" variables unmodified', group.name)
                 existing_group_names.add(group.name)
                 self._batch_add_m2m(self.inventory_source.groups, group)
         for group_name in all_group_names:
@@ -932,13 +607,13 @@ class Command(NoArgsCommand):
                 continue
             mem_group = self.all_group.all_groups[group_name]
             group = self.inventory.groups.create(name=group_name, variables=json.dumps(mem_group.variables), description='imported')
-            self.logger.info('Group "%s" added', group.name)
+            logger.info('Group "%s" added', group.name)
             self._batch_add_m2m(self.inventory_source.groups, group)
         self._batch_add_m2m(self.inventory_source.groups, flush=True)
         if settings.SQL_DEBUG:
-            self.logger.warning('group updates took %d queries for %d groups',
-                                len(connection.queries) - queries_before,
-                                len(self.all_group.all_groups))
+            logger.warning('group updates took %d queries for %d groups',
+                           len(connection.queries) - queries_before,
+                           len(self.all_group.all_groups))
 
     def _update_db_host_from_mem_host(self, db_host, mem_host):
         # Update host variables.
@@ -971,24 +646,24 @@ class Command(NoArgsCommand):
         if update_fields:
             db_host.save(update_fields=update_fields)
         if 'name' in update_fields:
-            self.logger.info('Host renamed from "%s" to "%s"', old_name, mem_host.name)
+            logger.info('Host renamed from "%s" to "%s"', old_name, mem_host.name)
         if 'instance_id' in update_fields:
             if old_instance_id:
-                self.logger.info('Host "%s" instance_id updated', mem_host.name)
+                logger.info('Host "%s" instance_id updated', mem_host.name)
             else:
-                self.logger.info('Host "%s" instance_id added', mem_host.name)
+                logger.info('Host "%s" instance_id added', mem_host.name)
         if 'variables' in update_fields:
             if self.overwrite_vars:
-                self.logger.info('Host "%s" variables replaced', mem_host.name)
+                logger.info('Host "%s" variables replaced', mem_host.name)
             else:
-                self.logger.info('Host "%s" variables updated', mem_host.name)
+                logger.info('Host "%s" variables updated', mem_host.name)
         else:
-            self.logger.info('Host "%s" variables unmodified', mem_host.name)
+            logger.info('Host "%s" variables unmodified', mem_host.name)
         if 'enabled' in update_fields:
             if enabled:
-                self.logger.info('Host "%s" is now enabled', mem_host.name)
+                logger.info('Host "%s" is now enabled', mem_host.name)
             else:
-                self.logger.info('Host "%s" is now disabled', mem_host.name)
+                logger.info('Host "%s" is now disabled', mem_host.name)
         self._batch_add_m2m(self.inventory_source.hosts, db_host)
 
     def _create_update_hosts(self):
@@ -1062,17 +737,17 @@ class Command(NoArgsCommand):
                 host_attrs['instance_id'] = instance_id
             db_host = self.inventory.hosts.create(**host_attrs)
             if enabled is False:
-                self.logger.info('Host "%s" added (disabled)', mem_host_name)
+                logger.info('Host "%s" added (disabled)', mem_host_name)
             else:
-                self.logger.info('Host "%s" added', mem_host_name)
+                logger.info('Host "%s" added', mem_host_name)
             self._batch_add_m2m(self.inventory_source.hosts, db_host)
 
         self._batch_add_m2m(self.inventory_source.hosts, flush=True)
 
         if settings.SQL_DEBUG:
-            self.logger.warning('host updates took %d queries for %d hosts',
-                                len(connection.queries) - queries_before,
-                                len(self.all_group.all_hosts))
+            logger.warning('host updates took %d queries for %d hosts',
+                           len(connection.queries) - queries_before,
+                           len(self.all_group.all_hosts))
 
     def _create_update_group_children(self):
         '''
@@ -1092,14 +767,14 @@ class Command(NoArgsCommand):
                     child_names = all_child_names[offset2:(offset2 + self._batch_size)]
                     db_children_qs = self.inventory.groups.filter(name__in=child_names)
                     for db_child in db_children_qs.filter(children__id=db_group.id):
-                        self.logger.info('Group "%s" already child of group "%s"', db_child.name, db_group.name)
+                        logger.info('Group "%s" already child of group "%s"', db_child.name, db_group.name)
                     for db_child in db_children_qs.exclude(children__id=db_group.id):
                         self._batch_add_m2m(db_group.children, db_child)
-                    self.logger.info('Group "%s" added as child of "%s"', db_child.name, db_group.name)
+                    logger.info('Group "%s" added as child of "%s"', db_child.name, db_group.name)
                 self._batch_add_m2m(db_group.children, flush=True)
         if settings.SQL_DEBUG:
-            self.logger.warning('Group-group updates took %d queries for %d group-group relationships',
-                                len(connection.queries) - queries_before, group_group_count)
+            logger.warning('Group-group updates took %d queries for %d group-group relationships',
+                           len(connection.queries) - queries_before, group_group_count)
 
     def _create_update_group_hosts(self):
         # For each host in a mem group, add it to the parent(s) to which it
@@ -1118,23 +793,23 @@ class Command(NoArgsCommand):
                     host_names = all_host_names[offset2:(offset2 + self._batch_size)]
                     db_hosts_qs = self.inventory.hosts.filter(name__in=host_names)
                     for db_host in db_hosts_qs.filter(groups__id=db_group.id):
-                        self.logger.info('Host "%s" already in group "%s"', db_host.name, db_group.name)
+                        logger.info('Host "%s" already in group "%s"', db_host.name, db_group.name)
                     for db_host in db_hosts_qs.exclude(groups__id=db_group.id):
                         self._batch_add_m2m(db_group.hosts, db_host)
-                        self.logger.info('Host "%s" added to group "%s"', db_host.name, db_group.name)
+                        logger.info('Host "%s" added to group "%s"', db_host.name, db_group.name)
                 all_instance_ids = sorted([h.instance_id for h in mem_group.hosts if h.instance_id])
                 for offset2 in xrange(0, len(all_instance_ids), self._batch_size):
                     instance_ids = all_instance_ids[offset2:(offset2 + self._batch_size)]
                     db_hosts_qs = self.inventory.hosts.filter(instance_id__in=instance_ids)
                     for db_host in db_hosts_qs.filter(groups__id=db_group.id):
-                        self.logger.info('Host "%s" already in group "%s"', db_host.name, db_group.name)
+                        logger.info('Host "%s" already in group "%s"', db_host.name, db_group.name)
                     for db_host in db_hosts_qs.exclude(groups__id=db_group.id):
                         self._batch_add_m2m(db_group.hosts, db_host)
-                        self.logger.info('Host "%s" added to group "%s"', db_host.name, db_group.name)
+                        logger.info('Host "%s" added to group "%s"', db_host.name, db_group.name)
                 self._batch_add_m2m(db_group.hosts, flush=True)
         if settings.SQL_DEBUG:
-            self.logger.warning('Group-host updates took %d queries for %d group-host relationships',
-                                len(connection.queries) - queries_before, group_host_count)
+            logger.warning('Group-host updates took %d queries for %d group-host relationships',
+                           len(connection.queries) - queries_before, group_host_count)
 
     def load_into_database(self):
         '''
@@ -1159,14 +834,14 @@ class Command(NoArgsCommand):
     def check_license(self):
         license_info = TaskEnhancer().validate_enhancements()
         if license_info.get('license_key', 'UNLICENSED') == 'UNLICENSED':
-            self.logger.error(LICENSE_NON_EXISTANT_MESSAGE)
+            logger.error(LICENSE_NON_EXISTANT_MESSAGE)
             raise CommandError('No Tower license found!')
         available_instances = license_info.get('available_instances', 0)
         free_instances = license_info.get('free_instances', 0)
         time_remaining = license_info.get('time_remaining', 0)
         new_count = Host.objects.active_count()
         if time_remaining <= 0 and not license_info.get('demo', False):
-            self.logger.error(LICENSE_EXPIRED_MESSAGE)
+            logger.error(LICENSE_EXPIRED_MESSAGE)
             raise CommandError("License has expired!")
         if free_instances < 0:
             d = {
@@ -1174,9 +849,9 @@ class Command(NoArgsCommand):
                 'available_instances': available_instances,
             }
             if license_info.get('demo', False):
-                self.logger.error(DEMO_LICENSE_MESSAGE % d)
+                logger.error(DEMO_LICENSE_MESSAGE % d)
             else:
-                self.logger.error(LICENSE_MESSAGE % d)
+                logger.error(LICENSE_MESSAGE % d)
             raise CommandError('License count exceeded!')
 
     def mark_license_failure(self, save=True):
@@ -1185,7 +860,7 @@ class Command(NoArgsCommand):
 
     def handle_noargs(self, **options):
         self.verbosity = int(options.get('verbosity', 1))
-        self.init_logging()
+        self.set_logging_level()
         self.inventory_name = options.get('inventory_name', None)
         self.inventory_id = options.get('inventory_id', None)
         self.overwrite = bool(options.get('overwrite', False))
@@ -1224,7 +899,7 @@ class Command(NoArgsCommand):
         TODO: Remove this deprecation when we remove support for rax.py
         '''
         if self.source == "rax.py":
-            self.logger.info("Rackspace inventory sync is Deprecated in Tower 3.1.0 and support for Rackspace will be removed in a future release.")
+            logger.info("Rackspace inventory sync is Deprecated in Tower 3.1.0 and support for Rackspace will be removed in a future release.")
 
         begin = time.time()
         self.load_inventory_from_database()
@@ -1249,7 +924,7 @@ class Command(NoArgsCommand):
                         self.inventory_update.save()
 
             # Load inventory from source.
-            self.all_group = load_inventory_source(self.source, None,
+            self.all_group = load_inventory_source(self.source,
                                                    self.group_filter_re,
                                                    self.host_filter_re,
                                                    self.exclude_empty_groups,
@@ -1262,7 +937,7 @@ class Command(NoArgsCommand):
                 with transaction.atomic():
                     # Merge/overwrite inventory into database.
                     if settings.SQL_DEBUG:
-                        self.logger.warning('loading into database...')
+                        logger.warning('loading into database...')
                     with ignore_inventory_computed_fields():
                         if getattr(settings, 'ACTIVITY_STREAM_ENABLED_FOR_INVENTORY_SYNC', True):
                             self.load_into_database()
@@ -1273,8 +948,8 @@ class Command(NoArgsCommand):
                             queries_before2 = len(connection.queries)
                         self.inventory.update_computed_fields()
                         if settings.SQL_DEBUG:
-                            self.logger.warning('update computed fields took %d queries',
-                                                len(connection.queries) - queries_before2)
+                            logger.warning('update computed fields took %d queries',
+                                           len(connection.queries) - queries_before2)
                     try:
                         self.check_license()
                     except CommandError as e:
@@ -1282,11 +957,11 @@ class Command(NoArgsCommand):
                         raise e
 
                     if settings.SQL_DEBUG:
-                        self.logger.warning('Inventory import completed for %s in %0.1fs',
-                                            self.inventory_source.name, time.time() - begin)
+                        logger.warning('Inventory import completed for %s in %0.1fs',
+                                       self.inventory_source.name, time.time() - begin)
                     else:
-                        self.logger.info('Inventory import completed for %s in %0.1fs',
-                                         self.inventory_source.name, time.time() - begin)
+                        logger.info('Inventory import completed for %s in %0.1fs',
+                                    self.inventory_source.name, time.time() - begin)
                     status = 'successful'
 
             # If we're in debug mode, then log the queries and time
@@ -1294,9 +969,9 @@ class Command(NoArgsCommand):
             if settings.SQL_DEBUG:
                 queries_this_import = connection.queries[queries_before:]
                 sqltime = sum(float(x['time']) for x in queries_this_import)
-                self.logger.warning('Inventory import required %d queries '
-                                    'taking %0.3fs', len(queries_this_import),
-                                    sqltime)
+                logger.warning('Inventory import required %d queries '
+                               'taking %0.3fs', len(queries_this_import),
+                               sqltime)
         except Exception as e:
             if isinstance(e, KeyboardInterrupt):
                 status = 'canceled'
diff --git a/awx/main/migrations/0038_v320_release.py b/awx/main/migrations/0038_v320_release.py
index f8fe9ed045..9cf9afe692 100644
--- a/awx/main/migrations/0038_v320_release.py
+++ b/awx/main/migrations/0038_v320_release.py
@@ -97,12 +97,12 @@ class Migration(migrations.Migration):
         migrations.AlterField(
             model_name='inventorysource',
             name='source',
-            field=models.CharField(default=b'', max_length=32, blank=True, choices=[(b'', 'Manual'), (b'file', 'File, Directory or Script Locally or in Project'), (b'rax', 'Rackspace Cloud Servers'), (b'ec2', 'Amazon EC2'), (b'gce', 'Google Compute Engine'), (b'azure', 'Microsoft Azure Classic (deprecated)'), (b'azure_rm', 'Microsoft Azure Resource Manager'), (b'vmware', 'VMware vCenter'), (b'satellite6', 'Red Hat Satellite 6'), (b'cloudforms', 'Red Hat CloudForms'), (b'openstack', 'OpenStack'), (b'custom', 'Custom Script')]),
+            field=models.CharField(default=b'', max_length=32, blank=True, choices=[(b'', 'Manual'), (b'file', 'File, Directory or Script'), (b'scm', 'Sourced from a project in Tower'), (b'rax', 'Rackspace Cloud Servers'), (b'ec2', 'Amazon EC2'), (b'gce', 'Google Compute Engine'), (b'azure', 'Microsoft Azure Classic (deprecated)'), (b'azure_rm', 'Microsoft Azure Resource Manager'), (b'vmware', 'VMware vCenter'), (b'satellite6', 'Red Hat Satellite 6'), (b'cloudforms', 'Red Hat CloudForms'), (b'openstack', 'OpenStack'), (b'custom', 'Custom Script')]),
         ),
         migrations.AlterField(
             model_name='inventoryupdate',
             name='source',
-            field=models.CharField(default=b'', max_length=32, blank=True, choices=[(b'', 'Manual'), (b'file', 'File, Directory or Script Locally or in Project'), (b'rax', 'Rackspace Cloud Servers'), (b'ec2', 'Amazon EC2'), (b'gce', 'Google Compute Engine'), (b'azure', 'Microsoft Azure Classic (deprecated)'), (b'azure_rm', 'Microsoft Azure Resource Manager'), (b'vmware', 'VMware vCenter'), (b'satellite6', 'Red Hat Satellite 6'), (b'cloudforms', 'Red Hat CloudForms'), (b'openstack', 'OpenStack'), (b'custom', 'Custom Script')]),
+            field=models.CharField(default=b'', max_length=32, blank=True, choices=[(b'', 'Manual'), (b'file', 'File, Directory or Script'), (b'scm', 'Sourced from a project in Tower'), (b'rax', 'Rackspace Cloud Servers'), (b'ec2', 'Amazon EC2'), (b'gce', 'Google Compute Engine'), (b'azure', 'Microsoft Azure Classic (deprecated)'), (b'azure_rm', 'Microsoft Azure Resource Manager'), (b'vmware', 'VMware vCenter'), (b'satellite6', 'Red Hat Satellite 6'), (b'cloudforms', 'Red Hat CloudForms'), (b'openstack', 'OpenStack'), (b'custom', 'Custom Script')]),
         ),
         migrations.AlterField(
             model_name='inventorysource',
@@ -135,4 +135,16 @@ class Migration(migrations.Migration):
             name='notificationtemplate',
             unique_together=set([('organization', 'name')]),
         ),
+
+        # Add verbosity option to inventory updates
+        migrations.AddField(
+            model_name='inventorysource',
+            name='verbosity',
+            field=models.PositiveIntegerField(default=1, blank=True, choices=[(0, b'0 (WARNING)'), (1, b'1 (INFO)'), (2, b'2 (DEBUG)')]),
+        ),
+        migrations.AddField(
+            model_name='inventoryupdate',
+            name='verbosity',
+            field=models.PositiveIntegerField(default=1, blank=True, choices=[(0, b'0 (WARNING)'), (1, b'1 (INFO)'), (2, b'2 (DEBUG)')]),
+        ),
     ]
diff --git a/awx/main/models/inventory.py b/awx/main/models/inventory.py
index 1ddbc36801..6389a946a1 100644
--- a/awx/main/models/inventory.py
+++ b/awx/main/models/inventory.py
@@ -743,7 +743,8 @@ class InventorySourceOptions(BaseModel):
 
     SOURCE_CHOICES = [
         ('', _('Manual')),
-        ('file', _('File, Directory or Script Locally or in Project')),
+        ('file', _('File, Directory or Script')),
+        ('scm', _('Sourced from a project in Tower')),
         ('rax', _('Rackspace Cloud Servers')),
         ('ec2', _('Amazon EC2')),
         ('gce', _('Google Compute Engine')),
@@ -756,6 +757,13 @@ class InventorySourceOptions(BaseModel):
         ('custom', _('Custom Script')),
     ]
 
+    # From the options of the Django management base command
+    INVENTORY_UPDATE_VERBOSITY_CHOICES = [
+        (0, '0 (WARNING)'),
+        (1, '1 (INFO)'),
+        (2, '2 (DEBUG)'),
+    ]
+
     # Use tools/scripts/get_ec2_filter_names.py to build this list.
     INSTANCE_FILTER_NAMES = [
         "architecture",
@@ -902,6 +910,11 @@ class InventorySourceOptions(BaseModel):
         blank=True,
         default=0,
     )
+    verbosity = models.PositiveIntegerField(
+        choices=INVENTORY_UPDATE_VERBOSITY_CHOICES,
+        blank=True,
+        default=1,
+    )
 
     @classmethod
     def get_ec2_region_choices(cls):
@@ -1002,7 +1015,7 @@ class InventorySourceOptions(BaseModel):
         if not self.source:
             return None
         cred = self.credential
-        if cred and self.source != 'custom':
+        if cred and self.source not in ('custom', 'scm'):
             # If a credential was provided, it's important that it matches
             # the actual inventory source being used (Amazon requires Amazon
             # credentials; Rackspace requires Rackspace credentials; etc...)
@@ -1139,14 +1152,14 @@ class InventorySource(UnifiedJobTemplate, InventorySourceOptions):
     def _get_unified_job_field_names(cls):
         return ['name', 'description', 'source', 'source_path', 'source_script', 'source_vars', 'schedule',
                 'credential', 'source_regions', 'instance_filters', 'group_by', 'overwrite', 'overwrite_vars',
-                'timeout', 'launch_type', 'scm_project_update',]
+                'timeout', 'verbosity', 'launch_type', 'scm_project_update',]
 
     def save(self, *args, **kwargs):
         # If update_fields has been specified, add our field names to it,
         # if it hasn't been specified, then we're just doing a normal save.
         update_fields = kwargs.get('update_fields', [])
         is_new_instance = not bool(self.pk)
-        is_scm_type = self.scm_project_id is not None
+        is_scm_type = self.scm_project_id is not None and self.source == 'scm'
 
         # Set name automatically. Include PK (or placeholder) to make sure the names are always unique.
         replace_text = '__replace_%s__' % now()
@@ -1347,6 +1360,8 @@ class InventoryUpdate(UnifiedJob, InventorySourceOptions, JobNotificationMixin):
         if (self.source not in ('custom', 'ec2') and
                 not (self.credential)):
             return False
+        elif self.source in ('file', 'scm'):
+            return False
         return True
 
     '''
diff --git a/awx/main/tasks.py b/awx/main/tasks.py
index e45baef0cb..fd8bfd078d 100644
--- a/awx/main/tasks.py
+++ b/awx/main/tasks.py
@@ -1689,13 +1689,17 @@ class RunInventoryUpdate(BaseTask):
             env['FOREMAN_INI_PATH'] = cloud_credential
         elif inventory_update.source == 'cloudforms':
             env['CLOUDFORMS_INI_PATH'] = cloud_credential
-        elif inventory_update.source == 'file':
+        elif inventory_update.source == 'scm':
             # Parse source_vars to dict, update env.
             env.update(parse_yaml_or_json(inventory_update.source_vars))
         elif inventory_update.source == 'custom':
             for env_k in inventory_update.source_vars_dict:
                 if str(env_k) not in env and str(env_k) not in settings.INV_ENV_VARIABLE_BLACKLIST:
                     env[str(env_k)] = unicode(inventory_update.source_vars_dict[env_k])
+        elif inventory_update.source == 'file':
+            raise NotImplementedError('Can not update file sources through the task system.')
+        # add private_data_files
+        env['AWX_PRIVATE_DATA_DIR'] = kwargs.get('private_data_dir', '')
         return env
 
     def build_args(self, inventory_update, **kwargs):
@@ -1759,7 +1763,7 @@ class RunInventoryUpdate(BaseTask):
                     getattr(settings, '%s_INSTANCE_ID_VAR' % src.upper()),
                 ])
 
-        elif inventory_update.source == 'file':
+        elif inventory_update.source == 'scm':
             args.append(inventory_update.get_actual_source_path())
         elif inventory_update.source == 'custom':
             runpath = tempfile.mkdtemp(prefix='ansible_tower_launch_')
@@ -1770,11 +1774,10 @@ class RunInventoryUpdate(BaseTask):
             f.write(inventory_update.source_script.script.encode('utf-8'))
             f.close()
             os.chmod(path, stat.S_IRUSR | stat.S_IWUSR | stat.S_IXUSR)
-            args.append(runpath)
+            args.append(path)
             args.append("--custom")
             self.custom_dir_path.append(runpath)
-        verbosity = getattr(settings, 'INVENTORY_UPDATE_VERBOSITY', 1)
-        args.append('-v%d' % verbosity)
+        args.append('-v%d' % inventory_update.verbosity)
         if settings.DEBUG:
             args.append('--traceback')
         return args
diff --git a/awx/main/tests/data/large_ec2_inventory.py b/awx/main/tests/data/large_ec2_inventory.py
deleted file mode 100755
index ec0a06675a..0000000000
--- a/awx/main/tests/data/large_ec2_inventory.py
+++ /dev/null
@@ -1,890 +0,0 @@
-#!/usr/bin/env python
-
-# Python
-import json
-import optparse
-
-inv_list = {
-  "ansible1.axialmarket.com": [
-    "ec2-54-226-227-106.compute-1.amazonaws.com"
-  ], 
-  "ansible2.axialmarket.com": [
-    "ec2-54-227-113-75.compute-1.amazonaws.com"
-  ], 
-  "app1new.axialmarket.com": [
-    "ec2-54-235-143-131.compute-1.amazonaws.com"
-  ], 
-  "app2new.axialmarket.com": [
-    "ec2-54-235-143-132.compute-1.amazonaws.com"
-  ], 
-  "app2t.axialmarket.com": [
-    "ec2-23-23-168-208.compute-1.amazonaws.com"
-  ], 
-  "app2t.dev.axialmarket.com": [
-    "ec2-23-23-168-208.compute-1.amazonaws.com"
-  ], 
-  "awx.axialmarket.com": [
-    "ec2-54-211-252-32.compute-1.amazonaws.com"
-  ], 
-  "axtdev2.axialmarket.com": [
-    "ec2-54-234-3-7.compute-1.amazonaws.com"
-  ], 
-  "backup1.axialmarket.com": [
-    "ec2-23-23-170-30.compute-1.amazonaws.com"
-  ], 
-  "bah.axialmarket.com": [
-    "ec2-107-20-176-139.compute-1.amazonaws.com"
-  ], 
-  "bennew.axialmarket.com": [
-    "ec2-54-243-146-75.compute-1.amazonaws.com"
-  ], 
-  "build0.axialmarket.com": [
-    "ec2-54-226-244-191.compute-1.amazonaws.com"
-  ], 
-  "cburke0.axialmarket.com": [
-    "ec2-54-226-100-117.compute-1.amazonaws.com"
-  ], 
-  "dabnew.axialmarket.com": [
-    "ec2-107-22-248-113.compute-1.amazonaws.com"
-  ], 
-  "dannew.axialmarket.com": [
-    "ec2-107-22-247-88.compute-1.amazonaws.com"
-  ], 
-  "de1-intenv.axialmarket.com": [
-    "ec2-54-224-92-80.compute-1.amazonaws.com"
-  ], 
-  "dev11-20120311": [
-    "dev11-20120311.co735munpzcw.us-east-1.rds.amazonaws.com"
-  ], 
-  "dev11-20130828": [
-    "dev11-20130828.co735munpzcw.us-east-1.rds.amazonaws.com"
-  ], 
-  "dev11-20130903-dab": [
-    "dev11-20130903-dab.co735munpzcw.us-east-1.rds.amazonaws.com"
-  ], 
-  "firecrow.axialmarket.com": [
-    "ec2-54-227-30-105.compute-1.amazonaws.com"
-  ], 
-  "herby0.axialmarket.com": [
-    "ec2-174-129-140-30.compute-1.amazonaws.com"
-  ], 
-  "i-02966c7a": [
-    "ec2-23-21-57-109.compute-1.amazonaws.com"
-  ], 
-  "i-0485b47c": [
-    "ec2-23-23-168-208.compute-1.amazonaws.com"
-  ], 
-  "i-0805a578": [
-    "ec2-107-22-234-22.compute-1.amazonaws.com"
-  ], 
-  "i-0a1e4777": [
-    "ec2-75-101-129-169.compute-1.amazonaws.com"
-  ], 
-  "i-0e05a57e": [
-    "ec2-107-22-234-180.compute-1.amazonaws.com"
-  ], 
-  "i-116f5861": [
-    "ec2-54-235-143-162.compute-1.amazonaws.com"
-  ], 
-  "i-197edf79": [
-    "ec2-54-226-244-191.compute-1.amazonaws.com"
-  ], 
-  "i-26008355": [
-    "ec2-75-101-157-248.compute-1.amazonaws.com"
-  ], 
-  "i-2ff6135e": [
-    "ec2-54-242-36-133.compute-1.amazonaws.com"
-  ], 
-  "i-3cbc6d50": [
-    "ec2-54-234-233-19.compute-1.amazonaws.com"
-  ], 
-  "i-3e9a7f5b": [
-    "ec2-54-224-92-80.compute-1.amazonaws.com"
-  ], 
-  "i-43f6a533": [
-    "ec2-54-235-143-131.compute-1.amazonaws.com"
-  ], 
-  "i-45906822": [
-    "ec2-23-21-100-222.compute-1.amazonaws.com"
-  ], 
-  "i-508c1923": [
-    "ec2-23-23-130-201.compute-1.amazonaws.com"
-  ], 
-  "i-52970021": [
-    "ec2-23-23-169-133.compute-1.amazonaws.com"
-  ], 
-  "i-57cc2c25": [
-    "ec2-54-225-229-159.compute-1.amazonaws.com"
-  ], 
-  "i-59f23536": [
-    "ec2-75-101-128-47.compute-1.amazonaws.com"
-  ], 
-  "i-7012b200": [
-    "ec2-107-22-249-212.compute-1.amazonaws.com"
-  ], 
-  "i-73fead03": [
-    "ec2-54-235-143-132.compute-1.amazonaws.com"
-  ], 
-  "i-75faa905": [
-    "ec2-54-235-143-133.compute-1.amazonaws.com"
-  ], 
-  "i-76e49b0e": [
-    "ec2-75-101-128-224.compute-1.amazonaws.com"
-  ], 
-  "i-78c9450b": [
-    "ec2-54-225-88-116.compute-1.amazonaws.com"
-  ], 
-  "i-7aa18911": [
-    "ec2-54-211-252-32.compute-1.amazonaws.com"
-  ], 
-  "i-7dfdae0d": [
-    "ec2-54-235-143-134.compute-1.amazonaws.com"
-  ], 
-  "i-8559d6fa": [
-    "ec2-23-21-224-105.compute-1.amazonaws.com"
-  ], 
-  "i-899768e4": [
-    "ec2-54-234-3-7.compute-1.amazonaws.com"
-  ], 
-  "i-918130fb": [
-    "ec2-174-129-171-101.compute-1.amazonaws.com"
-  ], 
-  "i-99ce0ceb": [
-    "ec2-107-22-234-92.compute-1.amazonaws.com"
-  ], 
-  "i-9a450df8": [
-    "ec2-50-19-184-148.compute-1.amazonaws.com"
-  ], 
-  "i-9fce0ced": [
-    "ec2-107-20-176-139.compute-1.amazonaws.com"
-  ], 
-  "i-a80682c4": [
-    "ec2-54-235-65-26.compute-1.amazonaws.com"
-  ], 
-  "i-b43ab5df": [
-    "ec2-174-129-140-30.compute-1.amazonaws.com"
-  ], 
-  "i-baa893c2": [
-    "ec2-23-23-170-30.compute-1.amazonaws.com"
-  ], 
-  "i-bc23a0cf": [
-    "ec2-75-101-159-82.compute-1.amazonaws.com"
-  ], 
-  "i-bed948cd": [
-    "ec2-54-235-112-3.compute-1.amazonaws.com"
-  ], 
-  "i-c200c4a8": [
-    "ec2-54-227-30-105.compute-1.amazonaws.com"
-  ], 
-  "i-c69ae2be": [
-    "ec2-23-21-133-17.compute-1.amazonaws.com"
-  ], 
-  "i-c6d33fa3": [
-    "ec2-54-226-100-117.compute-1.amazonaws.com"
-  ], 
-  "i-cc4d2abf": [
-    "ec2-107-20-160-49.compute-1.amazonaws.com"
-  ], 
-  "i-cc9c3fbc": [
-    "ec2-54-243-146-75.compute-1.amazonaws.com"
-  ], 
-  "i-d01dacb3": [
-    "ec2-54-234-218-33.compute-1.amazonaws.com"
-  ], 
-  "i-da6631b3": [
-    "ec2-54-226-227-106.compute-1.amazonaws.com"
-  ], 
-  "i-dc6631b5": [
-    "ec2-54-227-113-75.compute-1.amazonaws.com"
-  ], 
-  "i-f005a580": [
-    "ec2-107-22-241-13.compute-1.amazonaws.com"
-  ], 
-  "i-f605a586": [
-    "ec2-107-22-247-88.compute-1.amazonaws.com"
-  ], 
-  "i-f805a588": [
-    "ec2-107-22-248-113.compute-1.amazonaws.com"
-  ], 
-  "i-f9829894": [
-    "ec2-54-225-172-84.compute-1.amazonaws.com"
-  ], 
-  "inf.axialmarket.com": [
-    "ec2-54-225-229-159.compute-1.amazonaws.com"
-  ], 
-  "jeffnew.axialmarket.com": [
-    "ec2-107-22-234-180.compute-1.amazonaws.com"
-  ], 
-  "jenkins.axialmarket.com": [
-    "ec2-23-21-224-105.compute-1.amazonaws.com"
-  ], 
-  "jump.axialmarket.com": [
-    "ec2-23-23-169-133.compute-1.amazonaws.com"
-  ], 
-  "key_Dana_Spiegel": [
-    "ec2-50-19-184-148.compute-1.amazonaws.com"
-  ], 
-  "key_bah-20130614": [
-    "ec2-54-234-218-33.compute-1.amazonaws.com", 
-    "ec2-54-226-244-191.compute-1.amazonaws.com"
-  ], 
-  "key_herby-axial-20130903": [
-    "ec2-54-224-92-80.compute-1.amazonaws.com"
-  ], 
-  "key_herbyg-axial-201308": [
-    "ec2-54-211-252-32.compute-1.amazonaws.com", 
-    "ec2-54-234-3-7.compute-1.amazonaws.com"
-  ], 
-  "key_ike-20120322": [
-    "ec2-23-21-100-222.compute-1.amazonaws.com", 
-    "ec2-23-21-57-109.compute-1.amazonaws.com", 
-    "ec2-75-101-128-224.compute-1.amazonaws.com", 
-    "ec2-23-21-133-17.compute-1.amazonaws.com", 
-    "ec2-23-23-168-208.compute-1.amazonaws.com", 
-    "ec2-23-23-170-30.compute-1.amazonaws.com", 
-    "ec2-75-101-129-169.compute-1.amazonaws.com", 
-    "ec2-23-21-224-105.compute-1.amazonaws.com", 
-    "ec2-54-242-36-133.compute-1.amazonaws.com", 
-    "ec2-107-22-234-22.compute-1.amazonaws.com", 
-    "ec2-107-22-234-180.compute-1.amazonaws.com", 
-    "ec2-107-22-241-13.compute-1.amazonaws.com", 
-    "ec2-107-22-247-88.compute-1.amazonaws.com", 
-    "ec2-107-22-248-113.compute-1.amazonaws.com", 
-    "ec2-107-22-249-212.compute-1.amazonaws.com", 
-    "ec2-54-243-146-75.compute-1.amazonaws.com", 
-    "ec2-54-235-143-131.compute-1.amazonaws.com", 
-    "ec2-54-235-143-133.compute-1.amazonaws.com", 
-    "ec2-54-235-143-132.compute-1.amazonaws.com", 
-    "ec2-54-235-143-134.compute-1.amazonaws.com", 
-    "ec2-54-235-143-162.compute-1.amazonaws.com", 
-    "ec2-75-101-157-248.compute-1.amazonaws.com", 
-    "ec2-75-101-159-82.compute-1.amazonaws.com", 
-    "ec2-54-225-88-116.compute-1.amazonaws.com", 
-    "ec2-23-23-169-133.compute-1.amazonaws.com", 
-    "ec2-54-235-112-3.compute-1.amazonaws.com", 
-    "ec2-54-225-229-159.compute-1.amazonaws.com", 
-    "ec2-107-22-234-92.compute-1.amazonaws.com", 
-    "ec2-107-20-176-139.compute-1.amazonaws.com", 
-    "ec2-54-225-172-84.compute-1.amazonaws.com"
-  ], 
-  "key_matt-20120423": [
-    "ec2-54-226-227-106.compute-1.amazonaws.com", 
-    "ec2-54-227-113-75.compute-1.amazonaws.com", 
-    "ec2-54-235-65-26.compute-1.amazonaws.com", 
-    "ec2-174-129-171-101.compute-1.amazonaws.com", 
-    "ec2-54-234-233-19.compute-1.amazonaws.com", 
-    "ec2-174-129-140-30.compute-1.amazonaws.com", 
-    "ec2-54-227-30-105.compute-1.amazonaws.com", 
-    "ec2-54-226-100-117.compute-1.amazonaws.com"
-  ], 
-  "key_mike-20121126": [
-    "ec2-75-101-128-47.compute-1.amazonaws.com", 
-    "ec2-23-23-130-201.compute-1.amazonaws.com", 
-    "ec2-107-20-160-49.compute-1.amazonaws.com"
-  ], 
-  "logstore1.axialmarket.com": [
-    "ec2-75-101-129-169.compute-1.amazonaws.com"
-  ], 
-  "logstore2.axialmarket.com": [
-    "ec2-54-235-112-3.compute-1.amazonaws.com"
-  ], 
-  "mattnew.axialmarket.com": [
-    "ec2-107-22-241-13.compute-1.amazonaws.com"
-  ], 
-  "monitor0.axialmarket.com": [
-    "ec2-54-235-65-26.compute-1.amazonaws.com"
-  ], 
-  "mx0.axialmarket.com": [
-    "ec2-23-21-57-109.compute-1.amazonaws.com"
-  ], 
-  "mx0a.axialmarket.com": [
-    "ec2-23-21-224-105.compute-1.amazonaws.com"
-  ], 
-  "mx1.axialmarket.com": [
-    "ec2-75-101-128-47.compute-1.amazonaws.com"
-  ], 
-  "mx2.axialmarket.com": [
-    "ec2-75-101-128-224.compute-1.amazonaws.com"
-  ], 
-  "mx5.axialmarket.com": [
-    "ec2-75-101-129-169.compute-1.amazonaws.com"
-  ], 
-  "pak.axialmarket.com": [
-    "ec2-54-242-36-133.compute-1.amazonaws.com"
-  ], 
-  "pak0.axialmarket.com": [
-    "ec2-54-242-36-133.compute-1.amazonaws.com"
-  ], 
-  "poundtest1.axialmarket.com": [
-    "ec2-107-20-160-49.compute-1.amazonaws.com"
-  ], 
-  "production-db7": [
-    "production-db7.co735munpzcw.us-east-1.rds.amazonaws.com"
-  ], 
-  "production-db7-rdssnap-p4hsx77hy8l5zqj": [
-    "production-db7-rdssnap-p4hsx77hy8l5zqj.co735munpzcw.us-east-1.rds.amazonaws.com"
-  ], 
-  "production-readonly-db7": [
-    "production-readonly-db7.co735munpzcw.us-east-1.rds.amazonaws.com"
-  ], 
-  "rabbit.axialmarket.com": [
-    "ec2-50-19-184-148.compute-1.amazonaws.com"
-  ], 
-  "rds_mysql": [
-    "dev11-20120311.co735munpzcw.us-east-1.rds.amazonaws.com", 
-    "dev11-20130828.co735munpzcw.us-east-1.rds.amazonaws.com", 
-    "dev11-20130903-dab.co735munpzcw.us-east-1.rds.amazonaws.com", 
-    "production-db7.co735munpzcw.us-east-1.rds.amazonaws.com", 
-    "production-db7-rdssnap-p4hsx77hy8l5zqj.co735munpzcw.us-east-1.rds.amazonaws.com", 
-    "production-readonly-db7.co735munpzcw.us-east-1.rds.amazonaws.com", 
-    "web-mktg-1.co735munpzcw.us-east-1.rds.amazonaws.com"
-  ], 
-  "rds_parameter_group_axialmarket-5-5": [
-    "dev11-20120311.co735munpzcw.us-east-1.rds.amazonaws.com", 
-    "production-db7.co735munpzcw.us-east-1.rds.amazonaws.com", 
-    "production-readonly-db7.co735munpzcw.us-east-1.rds.amazonaws.com"
-  ], 
-  "rds_parameter_group_default_mysql5_1": [
-    "web-mktg-1.co735munpzcw.us-east-1.rds.amazonaws.com"
-  ], 
-  "rds_parameter_group_default_mysql5_5": [
-    "dev11-20130828.co735munpzcw.us-east-1.rds.amazonaws.com"
-  ], 
-  "rds_parameter_group_mysqldump": [
-    "dev11-20130903-dab.co735munpzcw.us-east-1.rds.amazonaws.com", 
-    "production-db7-rdssnap-p4hsx77hy8l5zqj.co735munpzcw.us-east-1.rds.amazonaws.com"
-  ], 
-  "releng0.axialmarket.com": [
-    "ec2-23-21-100-222.compute-1.amazonaws.com"
-  ], 
-  "releng1.axialmarket.com": [
-    "ec2-23-21-133-17.compute-1.amazonaws.com"
-  ], 
-  "rexnew.axialmarket.com": [
-    "ec2-54-235-143-162.compute-1.amazonaws.com"
-  ], 
-  "rollupy0.axialmarket.com": [
-    "ec2-54-225-172-84.compute-1.amazonaws.com"
-  ], 
-  "security_group_MTA": [
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-    "ec2-107-20-160-49.compute-1.amazonaws.com", 
-    "ec2-54-225-172-84.compute-1.amazonaws.com", 
-    "dev11-20130828.co735munpzcw.us-east-1.rds.amazonaws.com", 
-    "dev11-20130903-dab.co735munpzcw.us-east-1.rds.amazonaws.com", 
-    "production-db7-rdssnap-p4hsx77hy8l5zqj.co735munpzcw.us-east-1.rds.amazonaws.com"
-  ], 
-  "us-east-1d": [
-    "ec2-54-226-227-106.compute-1.amazonaws.com", 
-    "ec2-54-227-113-75.compute-1.amazonaws.com", 
-    "ec2-54-235-65-26.compute-1.amazonaws.com", 
-    "ec2-174-129-171-101.compute-1.amazonaws.com", 
-    "ec2-54-234-233-19.compute-1.amazonaws.com", 
-    "ec2-75-101-128-47.compute-1.amazonaws.com", 
-    "ec2-54-234-218-33.compute-1.amazonaws.com", 
-    "ec2-54-226-244-191.compute-1.amazonaws.com", 
-    "ec2-50-19-184-148.compute-1.amazonaws.com", 
-    "ec2-174-129-140-30.compute-1.amazonaws.com", 
-    "ec2-54-227-30-105.compute-1.amazonaws.com", 
-    "ec2-54-226-100-117.compute-1.amazonaws.com", 
-    "ec2-54-224-92-80.compute-1.amazonaws.com", 
-    "ec2-23-21-57-109.compute-1.amazonaws.com", 
-    "ec2-75-101-128-224.compute-1.amazonaws.com", 
-    "ec2-23-21-133-17.compute-1.amazonaws.com", 
-    "ec2-54-211-252-32.compute-1.amazonaws.com", 
-    "ec2-54-234-3-7.compute-1.amazonaws.com", 
-    "ec2-23-21-224-105.compute-1.amazonaws.com", 
-    "ec2-54-242-36-133.compute-1.amazonaws.com", 
-    "ec2-107-22-234-22.compute-1.amazonaws.com", 
-    "ec2-107-22-234-180.compute-1.amazonaws.com", 
-    "ec2-107-22-241-13.compute-1.amazonaws.com", 
-    "ec2-107-22-247-88.compute-1.amazonaws.com", 
-    "ec2-107-22-248-113.compute-1.amazonaws.com", 
-    "ec2-54-243-146-75.compute-1.amazonaws.com", 
-    "ec2-54-235-143-131.compute-1.amazonaws.com", 
-    "ec2-54-235-143-133.compute-1.amazonaws.com", 
-    "ec2-54-235-143-162.compute-1.amazonaws.com", 
-    "ec2-75-101-159-82.compute-1.amazonaws.com", 
-    "ec2-54-225-88-116.compute-1.amazonaws.com", 
-    "ec2-23-23-130-201.compute-1.amazonaws.com", 
-    "ec2-23-23-169-133.compute-1.amazonaws.com", 
-    "ec2-54-225-229-159.compute-1.amazonaws.com", 
-    "ec2-107-22-234-92.compute-1.amazonaws.com", 
-    "ec2-107-20-176-139.compute-1.amazonaws.com", 
-    "dev11-20120311.co735munpzcw.us-east-1.rds.amazonaws.com", 
-    "web-mktg-1.co735munpzcw.us-east-1.rds.amazonaws.com"
-  ], 
-  "us-east-1e": [
-    "ec2-23-23-170-30.compute-1.amazonaws.com", 
-    "production-db7.co735munpzcw.us-east-1.rds.amazonaws.com", 
-    "production-readonly-db7.co735munpzcw.us-east-1.rds.amazonaws.com"
-  ], 
-  "web-mktg-1": [
-    "web-mktg-1.co735munpzcw.us-east-1.rds.amazonaws.com"
-  ], 
-  "web1.axialmarket.com": [
-    "ec2-75-101-157-248.compute-1.amazonaws.com"
-  ], 
-  "web2.axialmarket.com": [
-    "ec2-75-101-159-82.compute-1.amazonaws.com"
-  ], 
-  "willnew.axialmarket.com": [
-    "ec2-107-22-234-22.compute-1.amazonaws.com"
-  ], 
-  "worker1new.axialmarket.com": [
-    "ec2-54-235-143-133.compute-1.amazonaws.com"
-  ], 
-  "worker1newdev.axialmarket.com": [
-    "ec2-107-22-249-212.compute-1.amazonaws.com"
-  ], 
-  "worker2new.axialmarket.com": [
-    "ec2-54-235-143-134.compute-1.amazonaws.com"
-  ], 
-  "www-test.axialmarket.com": [
-    "ec2-54-234-233-19.compute-1.amazonaws.com"
-  ],
-  '_meta': {
-    'hostvars': {}
-  }
-}
-
-host_vars = {
-    
-}
-
-if __name__ == '__main__':
-    parser = optparse.OptionParser()
-    parser.add_option('--list', action='store_true', dest='list')
-    parser.add_option('--host', dest='hostname', default='')
-    options, args = parser.parse_args()
-    if options.list:
-        print json.dumps(inv_list, indent=4)
-    elif options.hostname:
-        print json.dumps(host_vars, indent=4)
-    else:
-        print json.dumps({}, indent=4)
-
diff --git a/awx/main/tests/data/largeinv.py b/awx/main/tests/data/largeinv.py
deleted file mode 100755
index 178dca6881..0000000000
--- a/awx/main/tests/data/largeinv.py
+++ /dev/null
@@ -1,63 +0,0 @@
-#!/usr/bin/env python
-
-# Python
-import json
-import optparse
-import os
-
-nhosts = int(os.environ.get('NHOSTS', 100))
-
-inv_list = {
-    '_meta': {
-        'hostvars': {},
-    },
-}
-
-for n in xrange(nhosts):
-    hostname = 'host-%08d.example.com' % n
-    group_evens_odds = 'evens.example.com' if n % 2 == 0 else 'odds.example.com'
-    group_threes = 'threes.example.com' if n % 3 == 0 else ''
-    group_fours = 'fours.example.com' if n % 4 == 0 else ''
-    group_fives = 'fives.example.com' if n % 5 == 0 else ''
-    group_sixes = 'sixes.example.com' if n % 6 == 0 else ''
-    group_sevens = 'sevens.example.com' if n % 7 == 0 else ''
-    group_eights = 'eights.example.com' if n % 8 == 0 else ''
-    group_nines = 'nines.example.com' if n % 9 == 0 else ''
-    group_tens = 'tens.example.com' if n % 10 == 0 else ''
-    group_by_10s = 'group-%07dX.example.com' % (n / 10)
-    group_by_100s = 'group-%06dXX.example.com' % (n / 100)
-    group_by_1000s = 'group-%05dXXX.example.com' % (n / 1000)
-    for group in [group_evens_odds, group_threes, group_fours, group_fives, group_sixes, group_sevens, group_eights, group_nines, group_tens, group_by_10s]:
-        if not group:
-            continue
-        if group in inv_list:
-            inv_list[group]['hosts'].append(hostname)
-        else:
-            inv_list[group] = {'hosts': [hostname], 'children': [], 'vars': {'group_prefix': group.split('.')[0]}}
-    if group_by_1000s not in inv_list:
-        inv_list[group_by_1000s] = {'hosts': [], 'children': [], 'vars': {'group_prefix': group_by_1000s.split('.')[0]}}
-    if group_by_100s not in inv_list:
-        inv_list[group_by_100s] = {'hosts': [], 'children': [], 'vars': {'group_prefix': group_by_100s.split('.')[0]}}
-    if group_by_100s not in inv_list[group_by_1000s]['children']:
-        inv_list[group_by_1000s]['children'].append(group_by_100s)
-    if group_by_10s not in inv_list[group_by_100s]['children']:
-        inv_list[group_by_100s]['children'].append(group_by_10s)
-    inv_list['_meta']['hostvars'][hostname] = {
-        'ansible_ssh_user': 'example',
-        'ansible_connection': 'local',
-        'host_prefix': hostname.split('.')[0],
-        'host_id': n,
-    }
-
-if __name__ == '__main__':
-    parser = optparse.OptionParser()
-    parser.add_option('--list', action='store_true', dest='list')
-    parser.add_option('--host', dest='hostname', default='')
-    options, args = parser.parse_args()
-    if options.list:
-        print json.dumps(inv_list, indent=4)
-    elif options.hostname:
-        print json.dumps(inv_list['_meta']['hostvars'][options.hostname], indent=4)
-    else:
-        print json.dumps({}, indent=4)
-
diff --git a/awx/main/tests/functional/commands/test_inventory_import.py b/awx/main/tests/functional/commands/test_inventory_import.py
index e4f67f6236..4efa8ca08e 100644
--- a/awx/main/tests/functional/commands/test_inventory_import.py
+++ b/awx/main/tests/functional/commands/test_inventory_import.py
@@ -9,68 +9,86 @@ import mock
 from django.core.management.base import CommandError
 
 # AWX
-from awx.main.management.commands.inventory_import import (
-    Command
-)
+from awx.main.management.commands import inventory_import
 from awx.main.models import Inventory, Host, Group
+from awx.main.utils.mem_inventory import dict_to_mem_data
 
 
-TEST_INVENTORY_INI = '''\
-# Some comment about blah blah blah...
-
-[webservers]
-web1.example.com ansible_ssh_host=w1.example.net
-web2.example.com
-web3.example.com:1022
-
-[webservers:vars]   # Comment on a section
-webvar=blah         # Comment on an option
-
-[dbservers]
-db1.example.com
-db2.example.com
-
-[dbservers:vars]
-dbvar=ugh
-
-[servers:children]
-webservers
-dbservers
-
-[servers:vars]
-varb=B
-
-[all:vars]
-vara=A
-
-[others]
-10.11.12.13
-10.12.14.16:8022
-fe80::1610:9fff:fedd:654b
-[fe80::1610:9fff:fedd:b654]:1022
-::1
-'''
+TEST_INVENTORY_CONTENT = {
+    "_meta": {
+        "hostvars": {}
+    },
+    "all": {
+        "children": [
+            "others",
+            "servers",
+            "ungrouped"
+        ],
+        "vars": {
+            "vara": "A"
+        }
+    },
+    "dbservers": {
+        "hosts": [
+            "db1.example.com",
+            "db2.example.com"
+        ],
+        "vars": {
+            "dbvar": "ugh"
+        }
+    },
+    "others": {
+        "hosts": {
+            "10.11.12.13": {},
+            "10.12.14.16": {"ansible_port": 8022},
+            "::1": {},
+            "fe80::1610:9fff:fedd:654b": {},
+            "fe80::1610:9fff:fedd:b654": {"ansible_port": 1022}
+        }
+    },
+    "servers": {
+        "children": [
+            "dbservers",
+            "webservers"
+        ],
+        "vars": {
+            "varb": "B"
+        }
+    },
+    "ungrouped": {},
+    "webservers": {
+        "hosts": {
+            "web1.example.com": {
+                "ansible_ssh_host": "w1.example.net"
+            },
+            "web2.example.com": {},
+            "web3.example.com": {
+                "ansible_port": 1022
+            }
+        },
+        "vars": {
+            "webvar": "blah"
+        }
+    }
+}
 
 
-@pytest.fixture(scope='session')
-def test_dir(tmpdir_factory):
-    return tmpdir_factory.mktemp('inv_files', numbered=False)
+TEST_MEM_OBJECTS = dict_to_mem_data(TEST_INVENTORY_CONTENT)
 
 
-@pytest.fixture(scope='session')
-def ini_file(test_dir):
-    fn = test_dir.join('test_hosts')
-    fn.write(TEST_INVENTORY_INI)
-    return fn
+def mock_logging(self):
+    pass
 
 
 @pytest.mark.django_db
-@mock.patch.object(Command, 'check_license', mock.MagicMock())
+@pytest.mark.inventory_import
+@mock.patch.object(inventory_import.Command, 'check_license', mock.MagicMock())
+@mock.patch.object(inventory_import.Command, 'set_logging_level', mock_logging)
 class TestInvalidOptionsFunctional:
 
     def test_invalid_options_invalid_source(self, inventory):
         # Give invalid file to the command
-        cmd = Command()
+        cmd = inventory_import.Command()
         with mock.patch('django.db.transaction.rollback'):
             with pytest.raises(IOError) as err:
                 cmd.handle_noargs(
@@ -78,28 +96,33 @@ class TestInvalidOptionsFunctional:
                     source='/tmp/pytest-of-root/pytest-7/inv_files0-invalid')
         assert 'Source does not exist' in err.value.message
 
-    def test_invalid_inventory_id(self, ini_file):
-        cmd = Command()
+    def test_invalid_inventory_id(self):
+        cmd = inventory_import.Command()
         with pytest.raises(CommandError) as err:
-            cmd.handle_noargs(inventory_id=42, source=ini_file.dirname)
+            cmd.handle_noargs(inventory_id=42, source='/notapath/shouldnotmatter')
         assert 'id = 42' in err.value.message
         assert 'cannot be found' in err.value.message
 
-    def test_invalid_inventory_name(self, ini_file):
-        cmd = Command()
+    def test_invalid_inventory_name(self):
+        cmd = inventory_import.Command()
         with pytest.raises(CommandError) as err:
-            cmd.handle_noargs(inventory_name='fooservers', source=ini_file.dirname)
+            cmd.handle_noargs(inventory_name='fooservers', source='/notapath/shouldnotmatter')
         assert 'name = fooservers' in err.value.message
         assert 'cannot be found' in err.value.message
 
 
 @pytest.mark.django_db
-@mock.patch.object(Command, 'check_license', mock.MagicMock())
+@pytest.mark.inventory_import
+@mock.patch.object(inventory_import.Command, 'check_license', mock.MagicMock())
+@mock.patch.object(inventory_import.Command, 'set_logging_level', mock_logging)
 class TestINIImports:
 
-    def test_inventory_single_ini_import(self, inventory, ini_file, capsys):
-        cmd = Command()
-        r = cmd.handle_noargs(inventory_id=inventory.pk, source=ini_file.dirname)
+    @mock.patch.object(inventory_import.AnsibleInventoryLoader, 'load', mock.MagicMock(return_value=TEST_MEM_OBJECTS))
+    def test_inventory_single_ini_import(self, inventory, capsys):
+        cmd = inventory_import.Command()
+        r = cmd.handle_noargs(
+            inventory_id=inventory.pk, source=__file__,
+            method='backport')
         out, err = capsys.readouterr()
         assert r is None
         assert out == ''
@@ -117,10 +140,12 @@ class TestINIImports:
         reloaded_inv = Inventory.objects.get(pk=inventory.pk)
         assert reloaded_inv.variables_dict == {'vara': 'A'}
 
+        # Groups vars are applied to host in the newer versions
         assert Host.objects.get(name='web1.example.com').variables_dict == {'ansible_ssh_host': 'w1.example.net'}
-        assert Host.objects.get(name='web3.example.com').variables_dict == {'ansible_ssh_port': 1022}
-        assert Host.objects.get(name='fe80::1610:9fff:fedd:b654').variables_dict == {'ansible_ssh_port': 1022}
-        assert Host.objects.get(name='10.12.14.16').variables_dict == {'ansible_ssh_port': 8022}
+        # Old version uses `ansible_ssh_port` but new version uses `ansible_port`
+        assert Host.objects.get(name='web3.example.com').variables_dict == {'ansible_port': 1022}
+        assert Host.objects.get(name='fe80::1610:9fff:fedd:b654').variables_dict == {'ansible_port': 1022}
+        assert Host.objects.get(name='10.12.14.16').variables_dict == {'ansible_port': 8022}
 
         servers = Group.objects.get(name='servers')
         assert servers.variables_dict == {'varb': 'B'}
@@ -143,24 +168,53 @@ class TestINIImports:
         assert invsrc.inventory_updates.count() == 1
         assert invsrc.inventory_updates.first().status == 'successful'
 
-    def test_inventory_import_group_vars_file(self, inventory, ini_file, tmpdir_factory):
-        # Create an extra group_vars file for group webservers
-        gvarf = tmpdir_factory.mktemp('inv_files/group_vars', numbered=False).join('webservers')
-        gvarf.write('''webservers_only_variable: foobar\n''')
+        # Check creation of ad-hoc inventory source - this was not called with one specified
+        assert reloaded_inv.inventory_sources.count() == 1
+        assert reloaded_inv.inventory_sources.all()[0].source == 'file'
 
-        cmd = Command()
-        cmd.handle_noargs(inventory_id=inventory.pk, source=ini_file.dirname)
+    @mock.patch.object(
+        inventory_import, 'load_inventory_source', mock.MagicMock(
+            return_value=dict_to_mem_data(
+                {
+                    "_meta": {
+                        "hostvars": {"foo": {"some_hostvar": "foobar"}}
+                    },
+                    "all": {
+                        "children": ["ungrouped"]
+                    },
+                    "ungrouped": {
+                        "hosts": ["foo"]
+                    }
+                }).all_group
+        )
+    )
+    def test_hostvars_are_saved(self, inventory):
+        cmd = inventory_import.Command()
+        cmd.handle_noargs(inventory_id=inventory.pk, source='doesnt matter')
+        assert inventory.hosts.count() == 1
+        h = inventory.hosts.all()[0]
+        assert h.name == 'foo'
+        assert h.variables_dict == {"some_hostvar": "foobar"}
 
-        servers = Group.objects.get(name='webservers')
-        assert servers.variables_dict == {'webvar': 'blah', 'webservers_only_variable': 'foobar'}
-
-    def test_inventory_import_host_vars_file(self, inventory, ini_file, tmpdir_factory):
-        # Create an extra host_vars file for one specific host
-        gvarf = tmpdir_factory.mktemp('inv_files/host_vars', numbered=False).join('web1.example.com')
-        gvarf.write('''host_only_variable: foobar\n''')
-
-        cmd = Command()
-        cmd.handle_noargs(inventory_id=inventory.pk, source=ini_file.dirname)
-
-        Host.objects.get(name='web1.example.com').variables_dict == {
-            'ansible_ssh_host': 'w1.example.net', 'host_only_variable': 'foobar'}
+    @mock.patch.object(
+        inventory_import, 'load_inventory_source', mock.MagicMock(
+            return_value=dict_to_mem_data(
+                {
+                    "_meta": {
+                        "hostvars": {}
+                    },
+                    "all": {
+                        "children": ["fooland", "barland"]
+                    },
+                    "fooland": {
+                        "children": ["barland"]
+                    },
+                    "barland": {
+                        "children": ["fooland"]
+                    }
+                }).all_group
+        )
+    )
+    def test_recursive_group_error(self, inventory):
+        cmd = inventory_import.Command()
+        cmd.handle_noargs(inventory_id=inventory.pk, source='doesnt matter')
diff --git a/awx/main/tests/functional/models/test_inventory.py b/awx/main/tests/functional/models/test_inventory.py
index 129c4e0c98..04aa7c556c 100644
--- a/awx/main/tests/functional/models/test_inventory.py
+++ b/awx/main/tests/functional/models/test_inventory.py
@@ -16,7 +16,8 @@ class TestSCMUpdateFeatures:
         inv_src = InventorySource(
             scm_project=project,
             source_path='inventory_file',
-            inventory=inventory)
+            inventory=inventory,
+            source='scm')
         with mock.patch.object(inv_src.scm_project, 'update') as mck_update:
             inv_src.save()
             mck_update.assert_called_once_with()
diff --git a/awx/main/tests/old/commands/commands_monolithic.py b/awx/main/tests/old/commands/commands_monolithic.py
index 6a775467d2..216a617eaa 100644
--- a/awx/main/tests/old/commands/commands_monolithic.py
+++ b/awx/main/tests/old/commands/commands_monolithic.py
@@ -5,16 +5,12 @@
 import json
 import os
 import shutil
-import string
 import StringIO
 import sys
-import tempfile
 import time
-import urlparse
 import unittest2 as unittest
 
 # Django
-from django.conf import settings
 from django.core.management import call_command
 from django.utils.timezone import now
 from django.test.utils import override_settings
@@ -36,77 +32,6 @@ TEST_PLAYBOOK = '''- hosts: test-group
     command: test 2 = 2
 '''
 
-TEST_INVENTORY_INI = '''\
-# Some comment about blah blah blah...
-
-[webservers]
-web1.example.com ansible_ssh_host=w1.example.net
-web2.example.com
-web3.example.com:1022
-
-[webservers:vars]   # Comment on a section
-webvar=blah         # Comment on an option
-
-[dbservers]
-db1.example.com
-db2.example.com
-
-[dbservers:vars]
-dbvar=ugh
-
-[servers:children]
-webservers
-dbservers
-
-[servers:vars]
-varb=B
-
-[all:vars]
-vara=A
-
-[others]
-10.11.12.13
-10.12.14.16:8022
-fe80::1610:9fff:fedd:654b
-[fe80::1610:9fff:fedd:b654]:1022
-::1
-'''
-
-TEST_INVENTORY_INI_WITH_HOST_PATTERNS = '''\
-[dotcom]
-web[00:63].example.com ansible_ssh_user=example
-dns.example.com
-
-[dotnet]
-db-[a:z].example.net
-ns.example.net
-
-[dotorg]
-[A:F][0:9].example.org:1022 ansible_ssh_user=example
-mx.example.org
-
-[dotus]
-lb[00:08:2].example.us even_odd=even
-lb[01:09:2].example.us even_odd=odd
-
-[dotcc]
-media[0:9][0:9].example.cc
-'''
-
-TEST_INVENTORY_INI_WITH_RECURSIVE_GROUPS = '''\
-[family:children]
-parent
-
-[parent:children]
-child
-
-[child:children]
-grandchild
-
-[grandchild:children]
-parent
-'''
-
 
 class BaseCommandMixin(object):
     '''
@@ -449,412 +374,3 @@ class CleanupActivityStreamTest(BaseCommandMixin, BaseTest):
         self.assertFalse(count_after)
         self.assertTrue(cleanup_elapsed < (create_elapsed / 4),
                         'create took %0.3fs, cleanup took %0.3fs, expected < %0.3fs' % (create_elapsed, cleanup_elapsed, create_elapsed / 4))
-
-
-@unittest.skipIf(os.environ.get('SKIP_SLOW_TESTS', False), 'Skipping slow test')
-class InventoryImportTest(BaseCommandMixin, BaseLiveServerTest):
-    '''
-    Test cases for inventory_import management command.
-    '''
-
-    def setUp(self):
-        super(InventoryImportTest, self).setUp()
-        self.start_rabbit()
-        self.setup_instances()
-        self.create_test_inventories()
-        self.create_test_ini()
-        self.create_test_license_file()
-
-    def tearDown(self):
-        super(InventoryImportTest, self).tearDown()
-        self.stop_rabbit()
-
-    def create_test_ini(self, inv_dir=None, ini_content=None):
-        ini_content = ini_content or TEST_INVENTORY_INI
-        handle, self.ini_path = tempfile.mkstemp(suffix='.txt', dir=inv_dir)
-        ini_file = os.fdopen(handle, 'w')
-        ini_file.write(ini_content)
-        ini_file.close()
-        self._temp_paths.append(self.ini_path)
-
-    def create_test_dir(self, host_names=None, group_names=None, suffix=''):
-        host_names = host_names or []
-        group_names = group_names or []
-        if 'all' not in group_names:
-            group_names.insert(0, 'all')
-        self.inv_dir = tempfile.mkdtemp()
-        self._temp_paths.append(self.inv_dir)
-        self.create_test_ini(self.inv_dir)
-        group_vars_dir = os.path.join(self.inv_dir, 'group_vars')
-        os.makedirs(group_vars_dir)
-        for group_name in group_names:
-            if suffix == '.json':
-                group_vars_content = '''{"test_group_name": "%s"}\n''' % group_name
-            else:
-                group_vars_content = '''test_group_name: %s\n''' % group_name
-            group_vars_file = os.path.join(group_vars_dir, '%s%s' % (group_name, suffix))
-            file(group_vars_file, 'wb').write(group_vars_content)
-        if host_names:
-            host_vars_dir = os.path.join(self.inv_dir, 'host_vars')
-            os.makedirs(host_vars_dir)
-            for host_name in host_names:
-                if suffix == '.json':
-                    host_vars_content = '''{"test_host_name": "%s"}''' % host_name
-                else:
-                    host_vars_content = '''test_host_name: %s''' % host_name
-                host_vars_file = os.path.join(host_vars_dir, '%s%s' % (host_name, suffix))
-                file(host_vars_file, 'wb').write(host_vars_content)
-
-    def check_adhoc_inventory_source(self, inventory, except_host_pks=None,
-                                     except_group_pks=None):
-        # Check that management command created a new inventory source and
-        # related inventory update.
-        inventory_sources = inventory.inventory_sources.filter(group=None)
-        self.assertEqual(inventory_sources.count(), 1)
-        inventory_source = inventory_sources[0]
-        self.assertEqual(inventory_source.source, 'file')
-        self.assertEqual(inventory_source.inventory_updates.count(), 1)
-        inventory_update = inventory_source.inventory_updates.all()[0]
-        self.assertEqual(inventory_update.status, 'successful')
-        for host in inventory.hosts.all():
-            if host.pk in (except_host_pks or []):
-                continue
-            source_pks = host.inventory_sources.values_list('pk', flat=True)
-            self.assertTrue(inventory_source.pk in source_pks)
-        for group in inventory.groups.all():
-            if group.pk in (except_group_pks or []):
-                continue
-            source_pks = group.inventory_sources.values_list('pk', flat=True)
-            self.assertTrue(inventory_source.pk in source_pks)
-
-    def test_dir_with_ini_file(self):
-        self.create_test_dir(host_names=['db1.example.com', 'db2.example.com'],
-                             group_names=['dbservers'], suffix='')
-        self.test_ini_file(self.inv_dir)
-        self.create_test_dir(host_names=['db1.example.com', 'db2.example.com'],
-                             group_names=['dbservers'], suffix='.yml')
-        self.test_ini_file(self.inv_dir)
-        self.create_test_dir(host_names=['db1.example.com', 'db2.example.com'],
-                             group_names=['dbservers'], suffix='.yaml')
-        self.test_ini_file(self.inv_dir)
-        self.create_test_dir(host_names=['db1.example.com', 'db2.example.com'],
-                             group_names=['dbservers'], suffix='.json')
-        self.test_ini_file(self.inv_dir)
-
-    def test_merge_from_ini_file(self, overwrite=False, overwrite_vars=False):
-        new_inv_vars = json.dumps({'varc': 'C'})
-        new_inv = self.organizations[0].inventories.create(name='inv123',
-                                                           variables=new_inv_vars)
-        lb_host_vars = json.dumps({'lbvar': 'ni!'})
-        lb_host = new_inv.hosts.create(name='lb.example.com',
-                                       variables=lb_host_vars)
-        lb_group = new_inv.groups.create(name='lbservers')
-        servers_group_vars = json.dumps({'vard': 'D'})
-        servers_group = new_inv.groups.create(name='servers',
-                                              variables=servers_group_vars)
-        servers_group.children.add(lb_group)
-        lb_group.hosts.add(lb_host)
-        result, stdout, stderr = self.run_command('inventory_import',
-                                                  inventory_id=new_inv.pk,
-                                                  source=self.ini_path,
-                                                  overwrite=overwrite,
-                                                  overwrite_vars=overwrite_vars)
-        self.assertEqual(result, None, stdout + stderr)
-        # Check that inventory is populated as expected.
-        new_inv = Inventory.objects.get(pk=new_inv.pk)
-        expected_group_names = set(['servers', 'dbservers', 'webservers',
-                                    'lbservers', 'others'])
-        if overwrite:
-            expected_group_names.remove('lbservers')
-        group_names = set(new_inv.groups.values_list('name', flat=True))
-        self.assertEqual(expected_group_names, group_names)
-        expected_host_names = set(['web1.example.com', 'web2.example.com',
-                                   'web3.example.com', 'db1.example.com',
-                                   'db2.example.com', 'lb.example.com',
-                                   '10.11.12.13', '10.12.14.16',
-                                   'fe80::1610:9fff:fedd:654b',
-                                   'fe80::1610:9fff:fedd:b654', '::1'])
-        if overwrite:
-            expected_host_names.remove('lb.example.com')
-        host_names = set(new_inv.hosts.values_list('name', flat=True))
-        self.assertEqual(expected_host_names, host_names)
-        expected_inv_vars = {'vara': 'A', 'varc': 'C'}
-        if overwrite_vars:
-            expected_inv_vars.pop('varc')
-        self.assertEqual(new_inv.variables_dict, expected_inv_vars)
-        for host in new_inv.hosts.all():
-            if host.name == 'web1.example.com':
-                self.assertEqual(host.variables_dict,
-                                 {'ansible_ssh_host': 'w1.example.net'})
-            elif host.name in ('web3.example.com', 'fe80::1610:9fff:fedd:b654'):
-                self.assertEqual(host.variables_dict, {'ansible_ssh_port': 1022})
-            elif host.name == '10.12.14.16':
-                self.assertEqual(host.variables_dict, {'ansible_ssh_port': 8022})
-            elif host.name == 'lb.example.com':
-                self.assertEqual(host.variables_dict, {'lbvar': 'ni!'})
-            else:
-                self.assertEqual(host.variables_dict, {})
-        for group in new_inv.groups.all():
-            if group.name == 'servers':
-                expected_vars = {'varb': 'B', 'vard': 'D'}
-                if overwrite_vars:
-                    expected_vars.pop('vard')
-                self.assertEqual(group.variables_dict, expected_vars)
-                children = set(group.children.values_list('name', flat=True))
-                expected_children = set(['dbservers', 'webservers', 'lbservers'])
-                if overwrite:
-                    expected_children.remove('lbservers')
-                self.assertEqual(children, expected_children)
-                self.assertEqual(group.hosts.count(), 0)
-            elif group.name == 'dbservers':
-                self.assertEqual(group.variables_dict, {'dbvar': 'ugh'})
-                self.assertEqual(group.children.count(), 0)
-                hosts = set(group.hosts.values_list('name', flat=True))
-                host_names = set(['db1.example.com','db2.example.com'])
-                self.assertEqual(hosts, host_names)
-            elif group.name == 'webservers':
-                self.assertEqual(group.variables_dict, {'webvar': 'blah'})
-                self.assertEqual(group.children.count(), 0)
-                hosts = set(group.hosts.values_list('name', flat=True))
-                host_names = set(['web1.example.com','web2.example.com',
-                                  'web3.example.com'])
-                self.assertEqual(hosts, host_names)
-            elif group.name == 'lbservers':
-                self.assertEqual(group.variables_dict, {})
-                self.assertEqual(group.children.count(), 0)
-                hosts = set(group.hosts.values_list('name', flat=True))
-                host_names = set(['lb.example.com'])
-                self.assertEqual(hosts, host_names)
-        if overwrite:
-            except_host_pks = set()
-            except_group_pks = set()
-        else:
-            except_host_pks = set([lb_host.pk])
-            except_group_pks = set([lb_group.pk])
-        self.check_adhoc_inventory_source(new_inv, except_host_pks,
-                                          except_group_pks)
-
-    def test_overwrite_vars_from_ini_file(self):
-        self.test_merge_from_ini_file(overwrite_vars=True)
-
-    def test_overwrite_from_ini_file(self):
-        self.test_merge_from_ini_file(overwrite=True)
-
-    def test_ini_file_with_host_patterns(self):
-        self.create_test_ini(ini_content=TEST_INVENTORY_INI_WITH_HOST_PATTERNS)
-        # New empty inventory.
-        new_inv = self.organizations[0].inventories.create(name='newb')
-        self.assertEqual(new_inv.hosts.count(), 0)
-        self.assertEqual(new_inv.groups.count(), 0)
-        result, stdout, stderr = self.run_command('inventory_import',
-                                                  inventory_id=new_inv.pk,
-                                                  source=self.ini_path)
-        self.assertEqual(result, None, stdout + stderr)
-        # Check that inventory is populated as expected.
-        new_inv = Inventory.objects.get(pk=new_inv.pk)
-        expected_group_names = set(['dotcom', 'dotnet', 'dotorg', 'dotus', 'dotcc'])
-        group_names = set(new_inv.groups.values_list('name', flat=True))
-        self.assertEqual(expected_group_names, group_names)
-        # Check that all host ranges are expanded into host names.
-        expected_host_names = set()
-        expected_host_names.update(['web%02d.example.com' % x for x in xrange(64)])
-        expected_host_names.add('dns.example.com')
-        expected_host_names.update(['db-%s.example.net' % x for x in string.ascii_lowercase])
-        expected_host_names.add('ns.example.net')
-        for x in 'ABCDEF':
-            for y in xrange(10):
-                expected_host_names.add('%s%d.example.org' % (x, y))
-        expected_host_names.add('mx.example.org')
-        expected_host_names.update(['lb%02d.example.us' % x for x in xrange(10)])
-        expected_host_names.update(['media%02d.example.cc' % x for x in xrange(100)])
-        host_names = set(new_inv.hosts.values_list('name', flat=True))
-        self.assertEqual(expected_host_names, host_names)
-        # Check hosts in dotcom group.
-        group = new_inv.groups.get(name='dotcom')
-        self.assertEqual(group.hosts.count(), 65)
-        for host in group.hosts.filter( name__startswith='web'):
-            self.assertEqual(host.variables_dict.get('ansible_ssh_user', ''), 'example')
-        # Check hosts in dotnet group.
-        group = new_inv.groups.get(name='dotnet')
-        self.assertEqual(group.hosts.count(), 27)
-        # Check hosts in dotorg group.
-        group = new_inv.groups.get(name='dotorg')
-        self.assertEqual(group.hosts.count(), 61)
-        for host in group.hosts.all():
-            if host.name.startswith('mx.'):
-                continue
-            self.assertEqual(host.variables_dict.get('ansible_ssh_user', ''), 'example')
-            self.assertEqual(host.variables_dict.get('ansible_ssh_port', 22), 1022)
-        # Check hosts in dotus group.
-        group = new_inv.groups.get(name='dotus')
-        self.assertEqual(group.hosts.count(), 10)
-        for host in group.hosts.all():
-            if int(host.name[2:4]) % 2 == 0:
-                self.assertEqual(host.variables_dict.get('even_odd', ''), 'even')
-            else:
-                self.assertEqual(host.variables_dict.get('even_odd', ''), 'odd')
-        # Check hosts in dotcc group.
-        group = new_inv.groups.get(name='dotcc')
-        self.assertEqual(group.hosts.count(), 100)
-        # Check inventory source/update after running command.
-        self.check_adhoc_inventory_source(new_inv)
-        # Test with invalid host pattern -- alpha begin > end.
-        self.create_test_ini(ini_content='[invalid]\nhost[X:P]')
-        result, stdout, stderr = self.run_command('inventory_import',
-                                                  inventory_id=new_inv.pk,
-                                                  source=self.ini_path)
-        self.assertTrue(isinstance(result, ValueError), result)
-        # Test with invalid host pattern -- different numeric pattern lengths.
-        self.create_test_ini(ini_content='[invalid]\nhost[001:08]')
-        result, stdout, stderr = self.run_command('inventory_import',
-                                                  inventory_id=new_inv.pk,
-                                                  source=self.ini_path)
-        self.assertTrue(isinstance(result, ValueError), result)
-        # Test with invalid host pattern -- invalid range/slice spec.
-        self.create_test_ini(ini_content='[invalid]\nhost[1:2:3:4]')
-        result, stdout, stderr = self.run_command('inventory_import',
-                                                  inventory_id=new_inv.pk,
-                                                  source=self.ini_path)
-        self.assertTrue(isinstance(result, ValueError), result)
-        # Test with invalid host pattern -- no begin.
-        self.create_test_ini(ini_content='[invalid]\nhost[:9]')
-        result, stdout, stderr = self.run_command('inventory_import',
-                                                  inventory_id=new_inv.pk,
-                                                  source=self.ini_path)
-        self.assertTrue(isinstance(result, ValueError), result)
-        # Test with invalid host pattern -- no end.
-        self.create_test_ini(ini_content='[invalid]\nhost[0:]')
-        result, stdout, stderr = self.run_command('inventory_import',
-                                                  inventory_id=new_inv.pk,
-                                                  source=self.ini_path)
-        self.assertTrue(isinstance(result, ValueError), result)
-        # Test with invalid host pattern -- invalid slice.
-        self.create_test_ini(ini_content='[invalid]\nhost[0:9:Q]')
-        result, stdout, stderr = self.run_command('inventory_import',
-                                                  inventory_id=new_inv.pk,
-                                                  source=self.ini_path)
-        self.assertTrue(isinstance(result, ValueError), result)
-
-    def test_ini_file_with_recursive_groups(self):
-        self.create_test_ini(ini_content=TEST_INVENTORY_INI_WITH_RECURSIVE_GROUPS)
-        new_inv = self.organizations[0].inventories.create(name='new')
-        self.assertEqual(new_inv.hosts.count(), 0)
-        self.assertEqual(new_inv.groups.count(), 0)
-        result, stdout, stderr = self.run_command('inventory_import',
-                                                  inventory_id=new_inv.pk,
-                                                  source=self.ini_path)
-        self.assertEqual(result, None, stdout + stderr)
-
-    def test_executable_file(self):
-        # Use existing inventory as source.
-        old_inv = self.inventories[1]
-        # Modify host name to contain brackets (AC-1295).
-        old_host = old_inv.hosts.all()[0]
-        old_host.name = '[hey look some brackets]'
-        old_host.save()
-        # New empty inventory.
-        new_inv = self.organizations[0].inventories.create(name='newb')
-        self.assertEqual(new_inv.hosts.count(), 0)
-        self.assertEqual(new_inv.groups.count(), 0)
-        # Use our own inventory script as executable file.
-        rest_api_url = self.live_server_url
-        parts = urlparse.urlsplit(rest_api_url)
-        username, password = self.get_super_credentials()
-        netloc = '%s:%s@%s' % (username, password, parts.netloc)
-        rest_api_url = urlparse.urlunsplit([parts.scheme, netloc, parts.path,
-                                            parts.query, parts.fragment])
-        os.environ.setdefault('REST_API_URL', rest_api_url)
-        os.environ['INVENTORY_ID'] = str(old_inv.pk)
-        source = os.path.join(os.path.dirname(__file__), '..', '..', '..', '..', 'plugins',
-                              'inventory', 'awxrest.py')
-        result, stdout, stderr = self.run_command('inventory_import',
-                                                  inventory_id=new_inv.pk,
-                                                  source=source)
-        self.assertEqual(result, None, stdout + stderr)
-        # Check that inventory is populated as expected.
-        new_inv = Inventory.objects.get(pk=new_inv.pk)
-        self.assertEqual(old_inv.variables_dict, new_inv.variables_dict)
-        old_groups = set(old_inv.groups.values_list('name', flat=True))
-        new_groups = set(new_inv.groups.values_list('name', flat=True))
-        self.assertEqual(old_groups, new_groups)
-        old_hosts = set(old_inv.hosts.values_list('name', flat=True))
-        new_hosts = set(new_inv.hosts.values_list('name', flat=True))
-        self.assertEqual(old_hosts, new_hosts)
-        for new_host in new_inv.hosts.all():
-            old_host = old_inv.hosts.get(name=new_host.name)
-            self.assertEqual(old_host.variables_dict, new_host.variables_dict)
-        for new_group in new_inv.groups.all():
-            old_group = old_inv.groups.get(name=new_group.name)
-            self.assertEqual(old_group.variables_dict, new_group.variables_dict)
-            old_children = set(old_group.children.values_list('name', flat=True))
-            new_children = set(new_group.children.values_list('name', flat=True))
-            self.assertEqual(old_children, new_children)
-            old_hosts = set(old_group.hosts.values_list('name', flat=True))
-            new_hosts = set(new_group.hosts.values_list('name', flat=True))
-            self.assertEqual(old_hosts, new_hosts)
-        self.check_adhoc_inventory_source(new_inv)
-
-    def test_executable_file_with_meta_hostvars(self):
-        os.environ['INVENTORY_HOSTVARS'] = '1'
-        self.test_executable_file()
-
-    def test_large_executable_file(self):
-        new_inv = self.organizations[0].inventories.create(name='newec2')
-        self.assertEqual(new_inv.hosts.count(), 0)
-        self.assertEqual(new_inv.groups.count(), 0)
-        os.chdir(os.path.join(os.path.dirname(__file__), '..', '..', 'data'))
-        inv_file = 'large_ec2_inventory.py'
-        result, stdout, stderr = self.run_command('inventory_import',
-                                                  inventory_id=new_inv.pk,
-                                                  source=inv_file)
-        self.assertEqual(result, None, stdout + stderr)
-        # Check that inventory is populated as expected within a reasonable
-        # amount of time.  Computed fields should also be updated.
-        new_inv = Inventory.objects.get(pk=new_inv.pk)
-        self.assertNotEqual(new_inv.hosts.count(), 0)
-        self.assertNotEqual(new_inv.groups.count(), 0)
-        self.assertNotEqual(new_inv.total_hosts, 0)
-        self.assertNotEqual(new_inv.total_groups, 0)
-        self.assertElapsedLessThan(60)
-
-    def _get_ngroups_for_nhosts(self, n):
-        if n > 0:
-            return min(n, 10) + ((n - 1) / 10 + 1) + ((n - 1) / 100 + 1) + ((n - 1) / 1000 + 1)
-        else:
-            return 0
-
-    def _check_largeinv_import(self, new_inv, nhosts):
-        self._start_time = time.time()
-        inv_file = os.path.join(os.path.dirname(__file__), '..', '..', 'data', 'largeinv.py')
-        ngroups = self._get_ngroups_for_nhosts(nhosts)
-        os.environ['NHOSTS'] = str(nhosts)
-        result, stdout, stderr = self.run_command('inventory_import',
-                                                  inventory_id=new_inv.pk,
-                                                  source=inv_file,
-                                                  overwrite=True, verbosity=0)
-        self.assertEqual(result, None, stdout + stderr)
-        # Check that inventory is populated as expected within a reasonable
-        # amount of time.  Computed fields should also be updated.
-        new_inv = Inventory.objects.get(pk=new_inv.pk)
-        self.assertEqual(new_inv.hosts.count(), nhosts)
-        self.assertEqual(new_inv.groups.count(), ngroups)
-        self.assertEqual(new_inv.total_hosts, nhosts)
-        self.assertEqual(new_inv.total_groups, ngroups)
-        self.assertElapsedLessThan(120)
-
-    @unittest.skipIf(getattr(settings, 'LOCAL_DEVELOPMENT', False),
-                     'Skip this test in local development environments, '
-                     'which may vary widely on memory.')
-    def test_large_inventory_file(self):
-        new_inv = self.organizations[0].inventories.create(name='largeinv')
-        self.assertEqual(new_inv.hosts.count(), 0)
-        self.assertEqual(new_inv.groups.count(), 0)
-        nhosts = 2000
-        # Test initial import into empty inventory.
-        self._check_largeinv_import(new_inv, nhosts)
-        # Test re-importing and overwriting.
-        self._check_largeinv_import(new_inv, nhosts)
-        # Test re-importing with only half as many hosts.
-        self._check_largeinv_import(new_inv, nhosts / 2)
-        # Test re-importing that clears all hosts.
-        self._check_largeinv_import(new_inv, 0)
diff --git a/awx/main/tests/unit/commands/test_inventory_import.py b/awx/main/tests/unit/commands/test_inventory_import.py
index c28412428f..21b7fe391d 100644
--- a/awx/main/tests/unit/commands/test_inventory_import.py
+++ b/awx/main/tests/unit/commands/test_inventory_import.py
@@ -13,6 +13,7 @@ from awx.main.management.commands.inventory_import import (
 )
 
 
+@pytest.mark.inventory_import
 class TestInvalidOptions:
 
     def test_invalid_options_no_options_specified(self):
diff --git a/awx/main/tests/unit/models/test_survey_models.py b/awx/main/tests/unit/models/test_survey_models.py
index 502ee5c5d9..af2d0e3735 100644
--- a/awx/main/tests/unit/models/test_survey_models.py
+++ b/awx/main/tests/unit/models/test_survey_models.py
@@ -79,6 +79,7 @@ def test_job_args_unredacted_passwords(job):
     assert extra_vars['secret_key'] == 'my_password'
 
 
+@pytest.mark.survey
 def test_update_kwargs_survey_invalid_default(survey_spec_factory):
     spec = survey_spec_factory('var2')
     spec['spec'][0]['required'] = False
@@ -91,6 +92,7 @@ def test_update_kwargs_survey_invalid_default(survey_spec_factory):
     assert json.loads(defaulted_extra_vars['extra_vars'])['var2'] == 2
 
 
+@pytest.mark.survey
 @pytest.mark.parametrize("question_type,default,expect_use,expect_value", [
     ("multiplechoice", "",       False, 'N/A'),  # historical bug
     ("multiplechoice", "zeb",    False, 'N/A'),  # zeb not in choices
@@ -125,6 +127,7 @@ def test_optional_survey_question_defaults(
         assert 'c' not in defaulted_extra_vars['extra_vars']
 
 
+@pytest.mark.survey
 class TestWorkflowSurveys:
     def test_update_kwargs_survey_defaults(self, survey_spec_factory):
         "Assure that the survey default over-rides a JT variable"
diff --git a/awx/main/tests/unit/utils/test_mem_inventory.py b/awx/main/tests/unit/utils/test_mem_inventory.py
new file mode 100644
index 0000000000..078d303323
--- /dev/null
+++ b/awx/main/tests/unit/utils/test_mem_inventory.py
@@ -0,0 +1,128 @@
+# AWX utils
+from awx.main.utils.mem_inventory import (
+    MemInventory,
+    mem_data_to_dict, dict_to_mem_data
+)
+
+import pytest
+import json
+
+
+@pytest.fixture
+def memory_inventory():
+    inventory = MemInventory()
+    h = inventory.get_host('my_host')
+    h.variables = {'foo': 'bar'}
+    g = inventory.get_group('my_group')
+    g.variables = {'foobar': 'barfoo'}
+    h2 = inventory.get_host('group_host')
+    g.add_host(h2)
+    return inventory
+
+
+@pytest.fixture
+def JSON_of_inv():
+    # Implemented as fixture becuase it may be change inside of tests
+    return {
+        "_meta": {
+            "hostvars": {
+                "group_host": {},
+                "my_host": {"foo": "bar"}
+            }
+        }, 
+        "all": {"children": ["my_group",  "ungrouped"]},
+        "my_group": {
+            "hosts": ["group_host"],
+            "vars": {"foobar": "barfoo"}
+        },
+        "ungrouped": {"hosts": ["my_host"]}
+    }
+
+
+# Structure mentioned in official docs
+# https://docs.ansible.com/ansible/dev_guide/developing_inventory.html
+@pytest.fixture
+def JSON_with_lists():
+    docs_example = '''{
+       "databases"   : {
+           "hosts"   : [ "host1.example.com", "host2.example.com" ],
+           "vars"    : {
+               "a"   : true
+           }
+       },
+       "webservers"  : [ "host2.example.com", "host3.example.com" ],
+       "atlanta"     : {
+           "hosts"   : [ "host1.example.com", "host4.example.com", "host5.example.com" ],
+           "vars"    : {
+               "b"   : false
+           },
+           "children": [ "marietta", "5points" ]
+       },
+       "marietta"    : [ "host6.example.com" ],
+       "5points"     : [ "host7.example.com" ]
+    }'''
+    return json.loads(docs_example)
+
+
+# MemObject basic operations tests
+
+@pytest.mark.inventory_import
+def test_inventory_create_all_group():
+    inventory = MemInventory()
+    assert inventory.all_group.name == 'all'
+
+
+@pytest.mark.inventory_import
+def test_create_child_group():
+    inventory = MemInventory()
+    g1 = inventory.get_group('g1')
+    # Create new group by name as child of g1
+    g2 = inventory.get_group('g2', g1)
+    # Check that child is in the children of the parent group
+    assert g1.children == [g2]
+    # Check that _only_ the parent group is listed as a root group
+    assert inventory.all_group.children == [g1]
+    # Check that _both_ are tracked by the global `all_groups` dict
+    assert set(inventory.all_group.all_groups.values()) == set([g1, g2])
+
+
+@pytest.mark.inventory_import
+def test_ungrouped_mechanics():
+    # ansible-inventory returns a group called `ungrouped`
+    # we can safely treat this the same as the `all_group`
+    inventory = MemInventory()
+    ug = inventory.get_group('ungrouped')
+    assert ug is inventory.all_group
+
+
+# MemObject --> JSON tests
+
+@pytest.mark.inventory_import
+def test_convert_memory_to_JSON_with_vars(memory_inventory):
+    data = mem_data_to_dict(memory_inventory)
+    # Assertions about the variables on the objects
+    assert data['_meta']['hostvars']['my_host'] == {'foo': 'bar'}
+    assert data['my_group']['vars'] == {'foobar': 'barfoo'}
+    # Orphan host should be found in ungrouped false group
+    assert data['ungrouped']['hosts'] == ['my_host']
+
+
+# JSON --> MemObject tests
+
+@pytest.mark.inventory_import
+def test_convert_JSON_to_memory_with_vars(JSON_of_inv):
+    inventory = dict_to_mem_data(JSON_of_inv)
+    # Assertions about the variables on the objects
+    assert inventory.get_host('my_host').variables == {'foo': 'bar'}
+    assert inventory.get_group('my_group').variables == {'foobar': 'barfoo'}
+    # Host should be child of group
+    assert inventory.get_host('group_host') in inventory.get_group('my_group').hosts
+
+
+@pytest.mark.inventory_import
+def test_host_lists_accepted(JSON_with_lists):
+    inventory = dict_to_mem_data(JSON_with_lists)
+    assert inventory.get_group('marietta').name == 'marietta'
+    # Check that marietta's hosts was saved
+    h = inventory.get_host('host6.example.com')
+    assert h.name == 'host6.example.com'
diff --git a/awx/main/utils/formatters.py b/awx/main/utils/formatters.py
index 868f1c50ee..5ee26062f7 100644
--- a/awx/main/utils/formatters.py
+++ b/awx/main/utils/formatters.py
@@ -5,6 +5,16 @@ from logstash.formatter import LogstashFormatterVersion1
 from copy import copy
 import json
 import time
+import logging
+
+
+class TimeFormatter(logging.Formatter):
+    '''
+    Custom log formatter used for inventory imports
+    '''
+    def format(self, record):
+        record.relativeSeconds = record.relativeCreated / 1000.0
+        return logging.Formatter.format(self, record)
 
 
 class LogstashFormatter(LogstashFormatterVersion1):
diff --git a/awx/main/utils/mem_inventory.py b/awx/main/utils/mem_inventory.py
new file mode 100644
index 0000000000..b7530fd358
--- /dev/null
+++ b/awx/main/utils/mem_inventory.py
@@ -0,0 +1,315 @@
+# Copyright (c) 2017 Ansible by Red Hat
+# All Rights Reserved.
+
+# Python
+import re
+import logging
+from collections import OrderedDict
+
+
+# Logger is used for any data-related messages so that the log level
+# can be adjusted on command invocation
+logger = logging.getLogger('awx.main.commands.inventory_import')
+
+
+__all__ = ['MemHost', 'MemGroup', 'MemInventory',
+           'mem_data_to_dict', 'dict_to_mem_data']
+
+
+ipv6_port_re = re.compile(r'^\[([A-Fa-f0-9:]{3,})\]:(\d+?)$')
+
+
+# Models for in-memory objects that represent an inventory
+
+
+class MemObject(object):
+    '''
+    Common code shared between in-memory groups and hosts.
+    '''
+
+    def __init__(self, name):
+        assert name, 'no name'
+        self.name = name
+
+
+class MemGroup(MemObject):
+    '''
+    In-memory representation of an inventory group.
+    '''
+
+    def __init__(self, name):
+        super(MemGroup, self).__init__(name)
+        self.children = []
+        self.hosts = []
+        self.variables = {}
+        self.parents = []
+        # Used on the "all" group in place of previous global variables.
+        # maps host and group names to hosts to prevent redudant additions
+        self.all_hosts = {}
+        self.all_groups = {}
+        self.variables = {}
+        logger.debug('Loaded group: %s', self.name)
+
+    def __repr__(self):
+        return '<_in-memory-group_ `{}`>'.format(self.name)
+
+    def add_child_group(self, group):
+        assert group.name is not 'all', 'group name is all'
+        assert isinstance(group, MemGroup), 'not MemGroup instance'
+        logger.debug('Adding child group %s to parent %s', group.name, self.name)
+        if group not in self.children:
+            self.children.append(group)
+        if self not in group.parents:
+            group.parents.append(self)
+
+    def add_host(self, host):
+        assert isinstance(host, MemHost), 'not MemHost instance'
+        logger.debug('Adding host %s to group %s', host.name, self.name)
+        if host not in self.hosts:
+            self.hosts.append(host)
+
+    def debug_tree(self, group_names=None):
+        group_names = group_names or set()
+        if self.name in group_names:
+            return
+        logger.debug('Dumping tree for group "%s":', self.name)
+        logger.debug('- Vars: %r', self.variables)
+        for h in self.hosts:
+            logger.debug('- Host: %s, %r',  h.name, h.variables)
+        for g in self.children:
+            logger.debug('- Child: %s', g.name)
+        logger.debug('----')
+        group_names.add(self.name)
+        for g in self.children:
+            g.debug_tree(group_names)
+
+
+class MemHost(MemObject):
+    '''
+    In-memory representation of an inventory host.
+    '''
+
+    def __init__(self, name, port=None):
+        super(MemHost, self).__init__(name)
+        self.variables = {}
+        self.instance_id = None
+        self.name = name
+        if port:
+            # was `ansible_ssh_port` in older Ansible/Tower versions
+            self.variables['ansible_port'] = port
+        logger.debug('Loaded host: %s', self.name)
+
+    def __repr__(self):
+        return '<_in-memory-host_ `{}`>'.format(self.name)
+
+
+class MemInventory(object):
+    '''
+    Common functions for an inventory loader from a given source.
+    '''
+    def __init__(self, all_group=None, group_filter_re=None, host_filter_re=None):
+        if all_group:
+            assert isinstance(all_group, MemGroup), '{} is not MemGroup instance'.format(all_group)
+            self.all_group = all_group
+        else:
+            self.all_group = self.create_group('all')
+        self.group_filter_re = group_filter_re
+        self.host_filter_re = host_filter_re
+
+    def create_host(self, host_name, port):
+        host = MemHost(host_name, port)
+        self.all_group.all_hosts[host_name] = host
+        return host
+
+    def get_host(self, name):
+        '''
+        Return a MemHost instance from host name, creating if needed.  If name
+        contains brackets, they will NOT be interpreted as a host pattern.
+        '''
+        m = ipv6_port_re.match(name)
+        if m:
+            host_name = m.groups()[0]
+            port = int(m.groups()[1])
+        elif name.count(':') == 1:
+            host_name = name.split(':')[0]
+            try:
+                port = int(name.split(':')[1])
+            except (ValueError, UnicodeDecodeError):
+                logger.warning(u'Invalid port "%s" for host "%s"',
+                               name.split(':')[1], host_name)
+                port = None
+        else:
+            host_name = name
+            port = None
+        if self.host_filter_re and not self.host_filter_re.match(host_name):
+            logger.debug('Filtering host %s', host_name)
+            return None
+        if host_name not in self.all_group.all_hosts:
+            self.create_host(host_name, port)
+        return self.all_group.all_hosts[host_name]
+
+    def create_group(self, group_name):
+        group = MemGroup(group_name)
+        if group_name not in ['all', 'ungrouped']:
+            self.all_group.all_groups[group_name] = group
+        return group
+
+    def get_group(self, name, all_group=None, child=False):
+        '''
+        Return a MemGroup instance from group name, creating if needed.
+        '''
+        all_group = all_group or self.all_group
+        if name in ['all', 'ungrouped']:
+            return all_group
+        if self.group_filter_re and not self.group_filter_re.match(name):
+            logger.debug('Filtering group %s', name)
+            return None
+        if name not in self.all_group.all_groups:
+            group = self.create_group(name)
+            if not child:
+                all_group.add_child_group(group)
+        return self.all_group.all_groups[name]
+
+    def delete_empty_groups(self):
+        for name, group in self.all_group.all_groups.items():
+            if not group.children and not group.hosts and not group.variables:
+                logger.debug('Removing empty group %s', name)
+                for parent in group.parents:
+                    if group in parent.children:
+                        parent.children.remove(group)
+                del self.all_group.all_groups[name]
+
+
+# Conversion utilities
+
+def mem_data_to_dict(inventory):
+    '''
+    Given an in-memory construct of an inventory, returns a dictionary that
+    follows Ansible guidelines on the structure of dynamic inventory sources
+
+    May be replaced by removing in-memory constructs within this file later
+    '''
+    all_group = inventory.all_group
+    inventory_data = OrderedDict([])
+    # Save hostvars to _meta
+    inventory_data['_meta'] = OrderedDict([])
+    hostvars = OrderedDict([])
+    for name, host_obj in all_group.all_hosts.items():
+        hostvars[name] = host_obj.variables
+    inventory_data['_meta']['hostvars'] = hostvars
+    # Save children of `all` group
+    inventory_data['all'] = OrderedDict([])
+    if all_group.variables:
+        inventory_data['all']['vars'] = all_group.variables
+    inventory_data['all']['children'] = [c.name for c in all_group.children]
+    inventory_data['all']['children'].append('ungrouped')
+    # Save details of declared groups individually
+    ungrouped_hosts = set(all_group.all_hosts.keys())
+    for name, group_obj in all_group.all_groups.items():
+        group_host_names = [h.name for h in group_obj.hosts]
+        group_children_names = [c.name for c in group_obj.children]
+        group_data = OrderedDict([])
+        if group_host_names:
+            group_data['hosts'] = group_host_names
+            ungrouped_hosts.difference_update(group_host_names)
+        if group_children_names:
+            group_data['children'] = group_children_names
+        if group_obj.variables:
+            group_data['vars'] = group_obj.variables
+        inventory_data[name] = group_data
+    # Save ungrouped hosts
+    inventory_data['ungrouped'] = OrderedDict([])
+    if ungrouped_hosts:
+        inventory_data['ungrouped']['hosts'] = list(ungrouped_hosts)
+    return inventory_data
+
+
+def dict_to_mem_data(data, inventory=None):
+    '''
+    In-place operation on `inventory`, adds contents from `data` to the
+    in-memory representation of memory.
+    May be destructive on `data`
+    '''
+    assert isinstance(data, dict), 'Expected dict, received {}'.format(type(data))
+    if inventory is None:
+        inventory = MemInventory()
+
+    _meta = data.pop('_meta', {})
+
+    for k,v in data.iteritems():
+        group = inventory.get_group(k)
+        if not group:
+            continue
+
+        # Load group hosts/vars/children from a dictionary.
+        if isinstance(v, dict):
+            # Process hosts within a group.
+            hosts = v.get('hosts', {})
+            if isinstance(hosts, dict):
+                for hk, hv in hosts.iteritems():
+                    host = inventory.get_host(hk)
+                    if not host:
+                        continue
+                    if isinstance(hv, dict):
+                        host.variables.update(hv)
+                    else:
+                        logger.warning('Expected dict of vars for '
+                                       'host "%s", got %s instead',
+                                       hk, str(type(hv)))
+                    group.add_host(host)
+            elif isinstance(hosts, (list, tuple)):
+                for hk in hosts:
+                    host = inventory.get_host(hk)
+                    if not host:
+                        continue
+                    group.add_host(host)
+            else:
+                logger.warning('Expected dict or list of "hosts" for '
+                               'group "%s", got %s instead', k,
+                               str(type(hosts)))
+            # Process group variables.
+            vars = v.get('vars', {})
+            if isinstance(vars, dict):
+                group.variables.update(vars)
+            else:
+                logger.warning('Expected dict of vars for '
+                               'group "%s", got %s instead',
+                               k, str(type(vars)))
+            # Process child groups.
+            children = v.get('children', [])
+            if isinstance(children, (list, tuple)):
+                for c in children:
+                    child = inventory.get_group(c, inventory.all_group, child=True)
+                    if child and c != 'ungrouped':
+                        group.add_child_group(child)
+            else:
+                logger.warning('Expected list of children for '
+                               'group "%s", got %s instead',
+                               k, str(type(children)))
+
+        # Load host names from a list.
+        elif isinstance(v, (list, tuple)):
+            for h in v:
+                host = inventory.get_host(h)
+                if not host:
+                    continue
+                group.add_host(host)
+        else:
+            logger.warning('')
+            logger.warning('Expected dict or list for group "%s", '
+                           'got %s instead', k, str(type(v)))
+
+        if k not in ['all', 'ungrouped']:
+            inventory.all_group.add_child_group(group)
+
+    if _meta:
+        for k,v in inventory.all_group.all_hosts.iteritems():
+            meta_hostvars = _meta['hostvars'].get(k, {})
+            if isinstance(meta_hostvars, dict):
+                v.variables.update(meta_hostvars)
+            else:
+                logger.warning('Expected dict of vars for '
+                               'host "%s", got %s instead',
+                               k, str(type(meta_hostvars)))
+
+    return inventory
diff --git a/awx/plugins/ansible_inventory/backport.py b/awx/plugins/ansible_inventory/backport.py
new file mode 100755
index 0000000000..81bef170cc
--- /dev/null
+++ b/awx/plugins/ansible_inventory/backport.py
@@ -0,0 +1,326 @@
+#!/usr/bin/env python
+
+# (c) 2017, Brian Coca <bcoca@ansible.com>
+#
+# Ansible is free software: you can redistribute it and/or modify
+# it under the terms of the GNU General Public License as published by
+# the Free Software Foundation, either version 3 of the License, or
+# (at your option) any later version.
+#
+# Ansible is distributed in the hope that it will be useful,
+# but WITHOUT ANY WARRANTY; without even the implied warranty of
+# MERCHANTABILITY or FITNESS FOR A PARTICULAR PURPOSE.  See the
+# GNU General Public License for more details.
+#
+# You should have received a copy of the GNU General Public License
+# along with Ansible.  If not, see <http://www.gnu.org/licenses/>.
+#
+
+from __future__ import (absolute_import, division, print_function)
+__metaclass__ = type
+
+import optparse
+from operator import attrgetter
+
+from ansible import constants as C
+from ansible.cli import CLI
+from ansible.errors import AnsibleOptionsError
+from ansible.inventory import Inventory
+from ansible.parsing.dataloader import DataLoader
+from ansible.vars import VariableManager
+
+
+try:
+    from __main__ import display
+except ImportError:
+    from ansible.utils.display import Display
+    display = Display()
+
+INTERNAL_VARS = frozenset([ 'ansible_facts',
+                            'ansible_version',
+                            'ansible_playbook_python',
+                            'inventory_dir',
+                            'inventory_file',
+                            'inventory_hostname',
+                            'inventory_hostname_short',
+                            'groups',
+                            'group_names',
+                            'omit',
+                            'playbook_dir',
+                            ])
+
+
+class InventoryCLI(CLI):
+    ''' used to display or dump the configured inventory as Ansible sees it '''
+
+    ARGUMENTS = { 'host': 'The name of a host to match in the inventory, relevant when using --list',
+                  'group': 'The name of a group in the inventory, relevant when using --graph',
+                  }
+
+    def __init__(self, args):
+
+        super(InventoryCLI, self).__init__(args)
+        self.vm = None
+        self.loader = None
+
+    def parse(self):
+
+        self.parser = CLI.base_parser(
+            usage='usage: %prog [options] [host|group]',
+            epilog='Show Ansible inventory information, by default it uses the inventory script JSON format',
+            inventory_opts=True,
+            vault_opts=True
+        )
+
+        # Actions
+        action_group = optparse.OptionGroup(self.parser, "Actions", "One of following must be used on invocation, ONLY ONE!")
+        action_group.add_option("--list", action="store_true", default=False, dest='list', help='Output all hosts info, works as inventory script')
+        action_group.add_option("--host", action="store", default=None, dest='host', help='Output specific host info, works as inventory script')
+        action_group.add_option("--graph", action="store_true", default=False, dest='graph',
+                                help='create inventory graph, if supplying pattern it must be a valid group name')
+        self.parser.add_option_group(action_group)
+
+        # Options
+        self.parser.add_option("-y", "--yaml", action="store_true", default=False, dest='yaml',
+                               help='Use YAML format instead of default JSON, ignored for --graph')
+        self.parser.add_option("--vars", action="store_true", default=False, dest='show_vars',
+                               help='Add vars to graph display, ignored unless used with --graph')
+
+        try:
+            super(InventoryCLI, self).parse()
+        except Exception as e:
+            if 'Need to implement!' not in e.args[0]:
+                raise
+            # --- Start of 2.3+ super(InventoryCLI, self).parse() ---
+            self.options, self.args = self.parser.parse_args(self.args[1:])
+            if hasattr(self.options, 'tags') and not self.options.tags:
+                # optparse defaults does not do what's expected
+                self.options.tags = ['all']
+            if hasattr(self.options, 'tags') and self.options.tags:
+                if not C.MERGE_MULTIPLE_CLI_TAGS:
+                    if len(self.options.tags) > 1:
+                        display.deprecated('Specifying --tags multiple times on the command line currently uses the last specified value. In 2.4, values will be merged instead.  Set merge_multiple_cli_tags=True in ansible.cfg to get this behavior now.', version=2.5, removed=False)
+                        self.options.tags = [self.options.tags[-1]]
+
+                tags = set()
+                for tag_set in self.options.tags:
+                    for tag in tag_set.split(u','):
+                        tags.add(tag.strip())
+                self.options.tags = list(tags)
+
+            if hasattr(self.options, 'skip_tags') and self.options.skip_tags:
+                if not C.MERGE_MULTIPLE_CLI_TAGS:
+                    if len(self.options.skip_tags) > 1:
+                        display.deprecated('Specifying --skip-tags multiple times on the command line currently uses the last specified value. In 2.4, values will be merged instead.  Set merge_multiple_cli_tags=True in ansible.cfg to get this behavior now.', version=2.5, removed=False)
+                        self.options.skip_tags = [self.options.skip_tags[-1]]
+
+                skip_tags = set()
+                for tag_set in self.options.skip_tags:
+                    for tag in tag_set.split(u','):
+                        skip_tags.add(tag.strip())
+                self.options.skip_tags = list(skip_tags)
+            # --- End of 2.3+ super(InventoryCLI, self).parse() ---
+
+        display.verbosity = self.options.verbosity
+
+        self.validate_conflicts(vault_opts=True)
+
+        # there can be only one! and, at least, one!
+        used = 0
+        for opt in (self.options.list, self.options.host, self.options.graph):
+            if opt:
+                used += 1
+        if used == 0:
+            raise AnsibleOptionsError("No action selected, at least one of --host, --graph or --list needs to be specified.")
+        elif used > 1:
+            raise AnsibleOptionsError("Conflicting options used, only one of --host, --graph or --list can be used at the same time.")
+
+        # set host pattern to default if not supplied
+        if len(self.args) > 0:
+            self.options.pattern = self.args[0]
+        else:
+            self.options.pattern = 'all'
+
+    def run(self):
+
+        results = None
+
+        super(InventoryCLI, self).run()
+
+        # Initialize needed objects
+        self.loader = DataLoader()
+        self.vm = VariableManager()
+
+        # use vault if needed
+        if self.options.vault_password_file:
+            vault_pass = CLI.read_vault_password_file(self.options.vault_password_file, loader=self.loader)
+        elif self.options.ask_vault_pass:
+            vault_pass = self.ask_vault_passwords()
+        else:
+            vault_pass = None
+
+        if vault_pass:
+            self.loader.set_vault_password(vault_pass)
+
+        # actually get inventory and vars
+        self.inventory = Inventory(loader=self.loader, variable_manager=self.vm, host_list=self.options.inventory)
+        self.vm.set_inventory(self.inventory)
+
+        if self.options.host:
+            hosts = self.inventory.get_hosts(self.options.host)
+            if len(hosts) != 1:
+                raise AnsibleOptionsError("You must pass a single valid host to --hosts parameter")
+
+            myvars = self.vm.get_vars(self.loader, host=hosts[0])
+            self._remove_internal(myvars)
+
+            # FIXME: should we template first?
+            results = self.dump(myvars)
+
+        elif self.options.graph:
+            results = self.inventory_graph()
+        elif self.options.list:
+            top = self.inventory.get_group('all')
+            if self.options.yaml:
+                results = self.yaml_inventory(top)
+            else:
+                results = self.json_inventory(top)
+            results = self.dump(results)
+
+        if results:
+            display.display(results)
+            exit(0)
+
+        exit(1)
+
+    def dump(self, stuff):
+
+        if self.options.yaml:
+            import yaml
+            from ansible.parsing.yaml.dumper import AnsibleDumper
+            results = yaml.dump(stuff, Dumper=AnsibleDumper, default_flow_style=False)
+        else:
+            import json
+            results = json.dumps(stuff, sort_keys=True, indent=4)
+
+        return results
+
+    def _remove_internal(self, dump):
+
+        for internal in INTERNAL_VARS:
+            if internal in dump:
+                del dump[internal]
+
+    def _remove_empty(self, dump):
+        # remove empty keys
+        for x in ('hosts', 'vars', 'children'):
+            if x in dump and not dump[x]:
+                del dump[x]
+
+    def _show_vars(self, dump, depth):
+        result = []
+        self._remove_internal(dump)
+        if self.options.show_vars:
+            for (name, val) in sorted(dump.items()):
+                result.append(self._graph_name('{%s = %s}' % (name, val), depth + 1))
+        return result
+
+    def _graph_name(self, name, depth=0):
+        if depth:
+            name = "  |" * (depth) + "--%s" % name
+        return name
+
+    def _graph_group(self, group, depth=0):
+
+        result = [self._graph_name('@%s:' % group.name, depth)]
+        depth = depth + 1
+        for kid in sorted(group.child_groups, key=attrgetter('name')):
+            result.extend(self._graph_group(kid, depth))
+
+        if group.name != 'all':
+            for host in sorted(group.hosts, key=attrgetter('name')):
+                result.append(self._graph_name(host.name, depth))
+                result.extend(self._show_vars(host.get_vars(), depth))
+
+        result.extend(self._show_vars(group.get_vars(), depth))
+
+        return result
+
+    def inventory_graph(self):
+
+        start_at = self.inventory.get_group(self.options.pattern)
+        if start_at:
+            return '\n'.join(self._graph_group(start_at))
+        else:
+            raise AnsibleOptionsError("Pattern must be valid group name when using --graph")
+
+    def json_inventory(self, top):
+
+        def format_group(group):
+            results = {}
+            results[group.name] = {}
+            if group.name != 'all':
+                results[group.name]['hosts'] = [h.name for h in sorted(group.hosts, key=attrgetter('name'))]
+            results[group.name]['vars'] = group.get_vars()
+            results[group.name]['children'] = []
+            for subgroup in sorted(group.child_groups, key=attrgetter('name')):
+                results[group.name]['children'].append(subgroup.name)
+                results.update(format_group(subgroup))
+
+            self._remove_empty(results[group.name])
+            return results
+
+        results = format_group(top)
+
+        # populate meta
+        results['_meta'] = {'hostvars': {}}
+        hosts = self.inventory.get_hosts()
+        for host in hosts:
+            results['_meta']['hostvars'][host.name] = self.vm.get_vars(self.loader, host=host)
+            self._remove_internal(results['_meta']['hostvars'][host.name])
+
+        return results
+
+    def yaml_inventory(self, top):
+
+        seen = []
+
+        def format_group(group):
+            results = {}
+
+            # initialize group + vars
+            results[group.name] = {}
+            results[group.name]['vars'] = group.get_vars()
+
+            # subgroups
+            results[group.name]['children'] = {}
+            for subgroup in sorted(group.child_groups, key=attrgetter('name')):
+                if subgroup.name != 'all':
+                    results[group.name]['children'].update(format_group(subgroup))
+
+            # hosts for group
+            results[group.name]['hosts'] = {}
+            if group.name != 'all':
+                for h in sorted(group.hosts, key=attrgetter('name')):
+                    myvars = {}
+                    if h.name not in seen:  # avoid defining host vars more than once
+                        seen.append(h.name)
+                        myvars = self.vm.get_vars(self.loader, host=h)
+                        self._remove_internal(myvars)
+                    results[group.name]['hosts'][h.name] = myvars
+
+            self._remove_empty(results[group.name])
+            return results
+
+        return format_group(top)
+
+
+if __name__ == '__main__':
+    import imp
+    import subprocess
+    import sys
+    with open(__file__) as f:
+        imp.load_source('ansible.cli.inventory', __file__ + '.py', f)
+    ansible_path = subprocess.check_output(['which', 'ansible']).strip()
+    sys.argv[0] = 'ansible-inventory'
+    execfile(ansible_path)
diff --git a/awx/settings/defaults.py b/awx/settings/defaults.py
index 856c883aba..bd8a62c66d 100644
--- a/awx/settings/defaults.py
+++ b/awx/settings/defaults.py
@@ -907,6 +907,10 @@ LOGGING = {
         },
         'json': {
             '()': 'awx.main.utils.formatters.LogstashFormatter'
+        },
+        'timed_import': {
+            '()': 'awx.main.utils.formatters.TimeFormatter',
+            'format': '%(relativeSeconds)9.3f %(levelname)-8s %(message)s'
         }
     },
     'handlers': {
@@ -958,6 +962,11 @@ LOGGING = {
             'backupCount': 5,
             'formatter':'simple',
         },
+        'inventory_import': {
+            'level': 'DEBUG',
+            'class':'logging.StreamHandler',
+            'formatter': 'timed_import',
+        },
         'task_system': {
             'level': 'INFO',
             'class':'logging.handlers.RotatingFileHandler',
@@ -1029,6 +1038,10 @@ LOGGING = {
         'awx.main.commands.run_callback_receiver': {
             'handlers': ['callback_receiver'],
         },
+        'awx.main.commands.inventory_import': {
+            'handlers': ['inventory_import'],
+            'propagate': False
+        },
         'awx.main.tasks': {
             'handlers': ['task_system'],
         },
diff --git a/docs/scm_file_inventory.md b/docs/scm_file_inventory.md
index 8aa26cfc1b..4fbfbb373a 100644
--- a/docs/scm_file_inventory.md
+++ b/docs/scm_file_inventory.md
@@ -11,6 +11,12 @@ Fields that should be specified on creation of SCM inventory source:
  - `source_path` - relative path inside of the project indicating a
    directory or a file, if left blank, "" is still a relative path
    indicating the root directory of the project
+ - the `source` field should be set to "scm"
+
+Additionally:
+
+ - `source_vars` - if these are set on a "file" type inventory source
+   then they will be passed to the environment vars when running
 
 A user should not be able to update this inventory source via through
 the endpoint `/inventory_sources/N/update/`. Instead, they should update
@@ -40,18 +46,26 @@ update the project.
 
 > Any Inventory Ansible supports should be supported by this feature
 
-This statement is the overall goal and should hold true absolutely for
-Ansible version 2.4 and beyond due to the use of `ansible-inventory`.
-Versions of Ansible before that may not support all valid inventory syntax
-because the internal mechanism is different.
+This is accomplished by making use of the `ansible-inventory` command.
+the inventory import tower-manage command will check for the existnce
+of `ansible-inventory` and if it is not present, it will call a backported
+version of it. The backport is maintained as its own GPL3 licensed
+repository.
 
-Documentation should reflect the limitations of inventory file syntax
-support in old Ansible versions.
+https://github.com/ansible/ansible-inventory-backport
 
-# Acceptance Criteria Notes
+Because the internal mechanism is different, we need some coverage
+testing with Ansible versions pre-2.4 and after.
+
+# Acceptance Criteria Use Cases
 
 Some test scenarios to look at:
- - Obviously use a git repo with examples of host patterns, etc.
+ - Test projects that use scripts
+ - Test projects that have multiple inventory files in a directory,
+   group_vars, host_vars, etc.
+ - Test scripts in the project repo
+ - Test scripts that use environment variables provided by a credential
+   in Tower
  - Test multiple inventories that use the same project, pointing to different
    files / directories inside of the project
  - Feature works correctly even if project doesn't have any playbook files
@@ -61,3 +75,43 @@ Some test scenarios to look at:
  - If the project SCM update encounters errors, it should not run the
    inventory updates
 
+# Notes for Official Documentation
+
+The API guide should summarize what is in the use details.
+Once the UI implementation is done, the product docs should cover its
+standard use.
+
+## Update-on-launch
+
+This type of inventory source will not allow the `update_on_launch` field
+to be set to True. This is because of concerns related to the task
+manager job dependency tree.
+
+We should document the alternatives for a user to accomplish the same thing
+through in a different way.
+
+### Alternative 1: Use same project for playbook
+
+You can make a job template that uses a project as well as an inventory
+that updates from that same project. In this case, you can set the project
+to `update_on_launch`, in which case it will trigger an inventory update
+if needed.
+
+### Alternative 2: Use the project in a workflow
+
+If you must use a different project for the playbook than for the inventory
+source, then you can still place the project in a workflow and then have
+a job template run on success of the project update.
+
+This is guaranteed to have the inventory update "on time" (by this we mean
+that the inventory changes are complete before the job template is launched),
+because the project does not transition to the completed state
+until the inventory update is finished.
+
+Note that a failed inventory update does not mark the project as failed.
+
+## Lazy inventory updates
+
+It should also be noted that not every project update will trigger a
+corresponding inventory update. If the project revision has not changed
+and the inventory has not been edited, the inventory update will not fire.
diff --git a/pytest.ini b/pytest.ini
index 2993b1f577..4884ec4897 100644
--- a/pytest.ini
+++ b/pytest.ini
@@ -8,3 +8,5 @@ markers =
     ac: access control test
     license_feature: ensure license features are accessible or not depending on license
     mongo_db: drop mongodb test database before test runs
+    survey: tests related to survey feature
+    inventory_import: tests of code used by inventory import command