When you are using xendesktop 7.x or XenApp 7.x, you might see an error while configuring your database which says, “The current credentials have insufficient privileges to access the database server and perform the necessary operations. Do you wish to enter alternative credentials?”.

Solution1: If your firewall is turned on, create an inbound rule to allow 1433 port. In most of the cases this works.

Solution2: If it still doesnt work,  follow the article,  http://support.citrix.com/article/CTX132269,

Solution3:

SQL Server 2012 Express and I found the following things I needed to do in order to get it to work:

• Open the SQL Server Configuration Manager
• Expand SQL Server Network Configuration – Protocols for SQLEXPRESS
• Enable TCP/IP
• Right click TCP/IP and open Properties
• Check the IP2  settings reflect the servers IP address and subnet
• Check IPAll and ensure that Dynamic Ports is blank and make sure that the TCP port is set to 1433

Incoming ports opened on the Windows Firewall on the SQL server:

• TCP 1433
• TCP 1434
• UDP 1434

Hope this helps people in order to get things solved.