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The ora-12154 may be caused by confusion from having multiple homes (Oracle installs), yes. But you said you set PATH and TNS_ADMIN correctly.
The error message could be simply caused by using a connect identifier that is not defined (e.g. in current tnsnames.ora). Maybe the app somehow overrides PATH setting.
Use a tool such as Process Monitor to trace the applications file activities and find out exactly where the app is looking during connection attempt.
Edited by: orafad on Oct 10, 2011 12:31 PM