It seems this error is related to configuration of the domain for SQL for DPM. Microsoft Azure Backup Server requires SQL Server. The Azure Backup Server installation package comes bundled with the appropriate SQL Server binaries. If you want to use your own SQL installation, you can. However, the recommended choice is let the installer add a new instance of SQL Server. To ensure your choice works with your environment, select Check and Install.
I found this relevant blog post where a user was facing the same issue with DPM Install. Please check to see if the information might help resolve your issue. The Installing DPM documentation also has relevant configuration information.
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