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When I install SQL Server into the root of my drive, for example D:\, I get an error when I run a database deployer from a third party piece of software.

But when I move my SQL Server instance to D:\SQL\ (move it to a folder within the drive) then installation works perfectly.

My question doesn't regard the database deployer but more into the reason why SQL would have an issue with being installed into the root of a drive. Is this bad practice? Why shouldn't I install SQL Server to the root of my drive?

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Yes SQl server installation is likely to fail if you are trying to install it on root of a drive which is never advisable and has security implications. Actually it is related to permission setting on specific folders. As per this connect item

Based on further investigation this issue is due to the fact that SQL tightens the ACL for default data/log directories to exclude broad access for all authenticated users. If the drive root is chosen as the default data/log location then SQL will tighten the root ACL and thus effectively locking down the whole volume. The recommended course of action is to always use a subdirectory to store SQL data/log files.

So there seems to be problem with ACL's when installing on root of a drive in your case.

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