Bob Walters from Untangle on his Untangling blog has an article about open source business models and how Untangle is utilizing multiple revenue streams as their business model because the software they use is open source and is inherently free. Bob calls the article "Money for nothin’ and Code for Free ".Not sure how big a music fan Bob is but I think he has Dire Straits (the band who did that song) spelled wrong, but that is not the only thing I think wrong with Bob's article. Bob lays out Untangles revenue models as this:

• Untangle makes money from software by selling
  proprietary, for-profit extensions to our core open source code. We
  have targeted these extensions to appeal to larger, commercial
  customers. Our core software is open-source, full-featured, and free.
  Period.
• Untangle optionally packages its software on Pentium-based server appliances.
  We sell these servers at “cost-plus,” and so this is deliberately
  positioned as a convenience to our customers and channel and not as a
  core money-making strategy.
• Untangle sells tech support services, primarily to larger commercial customers, but also some of the larger schools and non-profits

So lets have a look. First off, if you don't know Untangle has a UTM that is aimed squarely at the "S" in the SMB market. It is open sourced and free and is made up of modules based on open source security tools. I get the upsell of extensions or premium features for some modules and premium modules, that is a no brainer. I don't disagree with the off the shelf hardware justification either, though there are many companies selling off the shelf appliances for a significant mark up over cost and it is a profit center for them. Untangle seems to be writing that revenue stream off. Than Bob says they are selling tech support services to larger customers. Again there is nothing earth shattering on that. Maybe sharing the revenue with local implementation partners? Again sounds like a VAR play, nothing special.

Here is where I think Bob and Untangles model could be in trouble. Bob assumes that the underlying software Untangle uses will be free, because it is free to them. But Untangle is using a Heinz 57 mix of open source security software of which it owns little if any of the copyrights. Yes, much of the software is today open source under GPL. But what happens if the copyright holders of the software and the project owners decide that Untangle is profiting from their software and hard work. What happens if they decide to dual license the software to anyone repackaging it in a UTM or other commercial product or for profit entity. Than what does Untangle do? Their whole business model goes down the tubes. From what I know of Untangles downloaded user base and their conversion rate to paying customers and what they charge, I don't think they have the margin to pay for any software. They could fork the software and develop it themselves or hope to develop a community to continue development, but I haven't seen that pulled off very often, if at all.

To stay with Bob's money for nothin theme, if he does not protect against this, Untangle could find themselves in dire straits.