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Instructions provided describe how to install ArcSDE and Microsoft SQL Server RDBMS on separate servers.
This configuration only supports SQL Server authenticated logins. If Windows authenticated logins are being used, it is recommended to use Direct Connect or install ArcSDE locally with SQL Server. For more information, please see the Knowledge Base article titled, 'Is Windows Authentication supported with a distributed ArcSDE SQL Server configuration?', located in the Related Information section below.
The ArcSDE service can run on a different server than the SQL Server instance with which it communicates. Configuring a remote ArcSDE instance is very similar to configuring a local one.