Hello,
The Windows Azure SDK development environment includes the storage emulator, a utility that simulates the Blob, Queue, and Table services available in Windows Azure on your local development machine. If you are building a hosted service that employs the Windows Azure storage services, or writing any external application that calls the storage services, you can test your code locally against the storage emulator.
By default the Windows Azure storage emulator on local machine works with a SQL Server Express instance which needs to be named ‘SQLExpress’. But in the event that ‘SQLExpress’ is not installed or enabled on the local machine then it gives following error in Visual Studio when you try to debug Windows Azure project:

If you look into output window in visual studio, the detailed message will look like this:
Windows Azure Tools: Failed to initialize Windows Azure storage emulator. Unable to start Development Storage. Failed to start Development Storage: the SQL Server instance ‘localhost\SQLExpress’ could not be found. Please configure the SQL Server instance for Development Storage using the ‘DSInit’ utility in the Windows Azure SDK.
The first time you run the Windows Azure storage emulator, an initialization process runs to configure the environment. The initialization process creates a database in SQL Server Express. You can use the DSInit command-line tool to configure the storage emulator to run against a local instance of SQL Server, rather than against SQL Express.
Note: You’ll need to have SQL Server installed and running on your machine for this to work.
To use SQL Server instead of SQL Server Express for Windows Azure storage:
- Click Start, point to All Programs, and then click Windows Azure SDK v1.4
- Right-click Windows Azure SDK Command Prompt, then click Run as Administrator
- In the Windows Azure SDK Command Prompt window, type the following command: DSInit /sqlInstance:<SQLServerInstance>
Note: >SQLServerInstance< is the name of the SQL Server instance without the (< >)’s
Note: You can also use the following command, which uses the default instance of SQL Server: DSInit /sqlInstance:.
An example of the steps above is shown in the image below:

Once you complete these steps, you shouldn’t have any issues debugging (or starting) a project in your development environment for Windows Azure. Have a look at a successful Development Storage Initialization shown in the image below.

If you wanted to take a look at the database, just open up SQL Server Management Studio and look at the database that’s created. For this example, a database was created with the name DevelopmentStorageDb20090919 – although yours may be different.
The information above is displayed in the image below:

- Pravin Jape