Update: The fix below works for Operations Manager and Service Manager Installations

If you have run into issues during setup where you know that you have a supported version of SQL running on your machine but setup in unable to detect it, you may have hit a SQL WMI provider issue. In OpsMgr 2007 R2, this shows up as the SQL Server requirement in the Prerequisite Checker failing.

Setup calls WMI in order to check SQL version to determine if the SQL version meets the prerequisites. Once you have verified that you do in fact have SQL installed on the machine and that it is indeed a supported version of SQL, check if the WMI provider is the the issue by trying to connect to SQL using SQL Server Configuration Manager. You should receive an error that reads:
"Cannot connect to WMI provider. You do not have permission or the server is unreachable. Not that you can only manage SQL Server 2005 and later servers with SQL Server Configuration Manager. Invalid class."

The solution for this issue is to recompile your MOF file, which can be done using the steps below:

1.      Open an elevated command prompt as Administrator
2.      Type the following in the command prompt
For SQL Server 2008 and R2:
mofcomp.exe "C:\Program Files (x86)\Microsoft SQL Server\100\Shared\sqlmgmproviderxpsp2up.mof"

For SQL Server 2012:
mofcomp.exe "C:\Program Files (x86)\Microsoft SQL Server\110\Shared\sqlmgmproviderxpsp2up.mof"

Additional information can be found here: