The Esri development team gave me a fix. The issue here is that the FLEXnet Licensing Service (which Esri now uses at 10.1, but was not used in 10.0) doesn�??t have the proper execution permissions set to it such that the �??Network Service�?� account can start it. Esri working on a patch, but in the meantime, there is a manual workaround: 1. Ensure that you are logged in as a user with administration privileges on the machine. 2. From the windows Start menu, select run and enter �??cmd�??. Right-click on �??cmd.exe�?� and select �??Run as Administrator.�?� 3. In the command prompt, run the following command: sc sdshow "FLEXnet Licensing Service" This will print out the DACL permissions that are registered with that service: D:(D;;CCDCLCSWRPWPDTLOCRSDRCWDWO;;;NU)(A;;CCDCLCSWRPWPDTLOCRSDRCWDWO;;;BA)(A;;CCDCLCSWRPWPDTLOCRSDRCWDWO;;;SY)(A;;CCLCSWRPLOCRRC;;;IU)S:(AU;FA;CCDCLCSWRPWPDTLOCRSDRCWDWO;;;WD) We need to insert �??(A;;CCLCSWRPWPDTLOCRRC;;;WD)�?� into the permission string, such that it becomes: D:(D;;CCDCLCSWRPWPDTLOCRSDRCWDWO;;;NU)(A;;CCLCSWRPWPDTLOCRRC;;;WD)(A;;CCDCLCSWRPWPDTLOCRSDRCWDWO;;;BA)(A;;CCDCLCSWRPWPDTLOCRSDRCWDWO;;;SY)(A;;CCLCSWRPLOCRRC;;;IU)S:(AU;FA;CCDCLCSWRPWPDTLOCRSDRCWDWO;;;WD) NOTE: The user�??s DACL string may vary, and edits to the string should be done carefully. 4. To register the DACL with the service run the command: sc sdset "FLEXnet Licensing Service" ${your original DACL string with the new permission string inserted} For the example above you would enter: sc sdset "FLEXnet Licensing Service" D:(D;;CCDCLCSWRPWPDTLOCRSDRCWDWO;;;NU)(A;;CCLCSWRPWPDTLOCRRC;;;WD)(A;;CCDCLCSWRPWPDTLOCRSDRCWDWO;;;BA)(A;;CCDCLCSWRPWPDTLOCRSDRCWDWO;;;SY)(A;;CCLCSWRPLOCRRC;;;IU)S:(AU;FA;CCDCLCSWRPWPDTLOCRSDRCWDWO;;;WD) 5. You should see a [SC] SetServiceObjectSecurity SUCCESS. That's it. Network Service should now run without error.
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