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Usually, the ArcSDE server runs on the same computer as the RDBMS from which it is storing and retrieving data. However, it is possible to run the ArcSDE server on one computer while running the associated Microsoft SQL Server instance on another computer.
To install ArcSDE on one system (server1) and Microsoft SQL Server on another (server2), an OLE DB provider is necessary. The SQL Server OLE DB provider comes with Microsoft's MDAC package, available from the Microsoft Universal Data Access Web site (Windows 2000 already includes this software.)
1. Install MDAC on ArcSDE server.
2. Install MDAC on SQL Server machine.
3. Install a supported version of SQL Server on the SQL Server machine per the instructions included with the software.
4. Install ArcSDE on ArcSDE server machine (server1) per the installation instructions contained with ArcSDE. In the ArcSDE installation wizard, specify the correct name of the SQL Server instance that is to run with ArcSDE.