Hi Omair,
A. Could you confirm if the current configuration is distributed i.e. DB on one service and application on another?
B. Could you also confirm if you are able to clear out the doubt on network issue i.e.
1. Are you able to ping to DB server from Application server?
2. Are you able to connect to SQL using the client tools on APP machine?
C. Could you please confirm if you are configured with Dynamic IP or Static?
D. Ensure that the hosts file in 'etc' folder is not updated with static value if you are configured your environment to Dynamic IP.
E. What version of SDM are you currently trying to configure?
Last but not the least, Could you confirm if you are using a custom DB Server in stance in your environment (I.e. as shown in screenshot SQL_NOMAN).
I noted few customer cases which talk about network issues and I suggest you look into the network if any of this causing due to that.
Thanks and Regards,
Maheshwar Kusuma