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SCOM 2012 Setup wizard cannot create Operations manager database on a SQL 2008 R2 server

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Weired but true. I have the account that is running SCOM 2012 Beta setup sysadmin rights on the sql 2008 r2 server. I reach to the stage where it asks me the name of SQL server and port number and location of DB. Now here is the situation, when I click next, the setup throws a curve ball saying that
"Setup is unable to create DB on SQL server_____. PLease make sure that the curret user has permissions to create DB on the SQL Server instance specified."

Note: The installation account has sysadmin rights!!!

Any idea what I might be missing?


Kapil Dham

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