UserErrorOpeningSQLConnection

@Nikos Sotiriadis Sorry for the inconvenience caused to you!

I understand that the discovery fails for your SQL Server backup on Azure VM. It seems you have already tried troubleshooting this issue (Firewall & permissions checked, allowed remote connect etc.)

I would like to suggest few things:

Make sure the AzureBackupWindowsWorkload extension is installed on the VM1. This extension is required for SQL Server backup in Azure VMs

Sometimes, antivirus programs can interfere with the backup process. Exclude the following folders and processes from antivirus scanning:

• Folders: C:\Program Files\Azure Workload Backup and C:\WindowsAzure\Logs\Plugins\Microsoft.Azure.RecoveryServices.WorkloadBackup.AzureBackupWindowsWorkload
• Processes: IaasWLPluginSvc.exe, IaaSWorkloadCoordinatorService.exe, and TriggerExtensionJob.exe

Verify that the firewall on the VM allows incoming connections on the SQL Server port (default is TCP port 1433).

Ensure that your Azure Network Security Group (NSG) rules allow traffic on the SQL Server port.

Restart the Azure Backup services on the VM and the Recovery Services Vault.

Let us know if these steps help resolve the issue. If no, the best option would be contact Azure technical support team by raising a support request. The ticket enables you to work closely with the support engineers and get a quick resolution to your issue.

Here is the link - https://docs.microsoft.com/en-us/azure/azure-portal/supportability/how-to-create-azure-support-request to create support case.

Hope this helps!