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You may need to enable tcp/ip
SQL Server Express listens on local named pipes and shared memory. With a default installation, you cannot remotely connect to SQL Server Express. You will need to enable TCP/IP and check if the firewall is enabled.
To enable TCP/IP:
From the Start menu, choose All Programs, point to Microsoft SQL Server 2005, point to Configuration Tools, and then click SQL Server Configuration Manager.
Optionally, you can open Computer Manager by right-clicking My Computer and choosing Manage. In Computer Management, expand Services and Applications, expand SQL Server Configuration Manager.
Expand SQL Server 2005 Network Configuration, and then click Protocols for InstanceName.
In the list of protocols, right-click the protocol you want to enable, and then click Enable.
The icon for the protocol will change to show that the protocol is enabled.
I am facing the same issue now even after enabling the TCP/IP. I am trying to install HFM 126.96.36.199 in my windows 7 OS.Relational DB is SQL Server 2005. Please help.EPM is not communicating with SQL Server.Please help !!
Thank you !