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If Sun CEO Jonathan Schwartz is distracted by an alleged Sun takeover by IBM, he didn't show it Wednesday in his Open Source Business Conference keynote speech, which focused on the commercial opportunities that follow in the wake of the world's massive open-source adoption. "Open source is now a given," said Schwartz, "What's interesting is what comes next."

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Jonathan Schwartz @ OSBC

(Credit: Zack Urlocker)It's an intriguing question to be asked by the CEO of the world's largest open-source company, but one that investors (and IBM?) increasingly demand of Sun. Based on his answers, Sun may well have a bright future, despite the fact that time is working against it.

But Schwartz is wicked smart, and very persuasive. It's now just a question of convincing prospective customers and his employees to follow his lead.

Lead to where? In a nutshell, and as communicated on his blog, Sun's open-source strategy is as follows:

Step 1: Freely drive engagement/adoption;
Step 2: Execute with fantastic commercial innovation;
Step 3: Connect the two

Actually delivering on this vision is harder than articulating it. "It's not enough to simply make software freely available," said Schwartz. "Those companies that do this are missing significant commercial opportunity."
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What is that opportunity? Schwartz rhetorically asked, "What is the next big revenue opportunity?" He answered, "The cloud." Emphasizing that the cloud enables Sun to deliver value that scales to its open-source user base: the cloud is the key to turning users into customers.

Sun's cloud services won't be free. They will, however, be built on open standards, open source, and open data. It's very similar to Canonical's emerging strategy for Ubuntu. The cloud enables Sun to deliver "closed" value while promoting it through open-source distribution.

It's a very compelling vision, and one that I think we'll see a range of open-source companies (and "proprietary" companies) follow suit. Sun is providing an exceptional example of how to turn downloads into dollars.

Disclosure: I am the founder of the Open Source Business Conference and continue to serve as its program chair.

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Follow me on Twitter at mjasay.