This version of Microsoft SQL Management Studio can only be used to connect to SQL Server 2000 and SQL Server 2005 servers

Yes it can, provided that you have kept your 2005 installation up to date!

We’re in the process of upgrading our environment to SQL Server 2008. Some folks have been unable to install SSMS 2008 for various exciting reasons related to an inability to apply Visual Studio 2008 SP 1 (a documented Microsoft bug). This isn’t really a problem — you can use SSMS 2005 to connect to SQL Server 2008, you just won’t get the new SSMS features.

Occasionally, though, a particularly laggardly developer who is just now trying for the first time to connect to our development 2008 instance will email me a screencap of the following dialog box and testily inform me that it NOT TRUE that you can use 2005 to connect to 2008 (they’re fond of capslock, those developers).

The problem is on the workstation end — a failure to keep SSMS 2005 properly patched. Simply apply SQL Server 2005 SP 2 (it came out in 2007, for crying out loud!), and you’ll have no problems using SSMS 2005 to connect to SQL Server 2008.

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