K2 Black pearl configuration

Hello,

I'm trying to use the K2 Black Pearl configuration tool to connect to my server environment from the Visio Designer.

I choose the option to Connect to an Existing environment, (using Windows authentication),enter my SQL Server and database  name, and then either test the connection (connection failed)

or choose next then get "failed to connect to [servername] 1433 using Windows Authentication

Now I can telnet servername on 1433 and get a connection, so it isn't a firewall issue.

Any ideas what this might indicate?

Thanks