I recently set up an internal VM for a dev environment, using Windows Azure. For simplicity, I set the server name and the account username (administrator) exactly the same. I named them both the same, e.g. ‘ServerApp1’. The installation of the VM worked perfectly fine. I only experienced an issue when trying to install SQL Server 2008 R2 Enterprise. The Database Engine, Analysis & Reporting Services would not install, and the error message (Username ” could not be found) was not very helpful! However, I googled the message and managed to find a SQL forum where someone suggested that SQL Server does not install properly when the administrator username and VM machine name are the same.
As a result of the above, I had to go into Control Panel and physically change the username for the Admin account. Unfortunately, once a username and VM name are specified in Azure, YOU CANNOT CHANGE IT. Or at least I could not find a way. I would strongly recommend that when setting up a VM, always ensure the admin username differs from the machine name. For example, I changed the username to something different, e.g. ‘ServerApp1Admin’. Afterwards, I re-installed SQL Server 2008 R2 and all components installed correctly.
I am not 100% sure if this is just an isolated problem with SQL Server 2008 R2, but it would be best to assume that all versions would cause the same issue.