When you use IIS to host you service, the service executes by using a special identity, not your own identity. Usually in IIS 7 this is the NetworkService user, and in IIS 7.5 the default is the special application pool identity user. Both these users actually
use the machine account in the domain when accessing external resources such as sql servers, so you need to add permission for your IIS machine in the SQL server. I suggest you tell your DBAs about the security issue and ask them to add the machine account
to the permitted logins.
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