VMware backups configured using App-Aware fail presenting the error: "Failed to copy vss snapshot server to guest. Cannot continue with snapshot. App aware snapshots enabled, but failed to create guest snapshot. Aborting backup."
In many cases, credentials can provide access rights but do not have the required rights to create folders in the Windows directory.
If this issue is persistent, use the local administrator account when applying app-aware credentials. This option will bypass UAC as the local administrator's account does not adhere to UAC prompts.
See also: Required credentials for VMware Application Aware backups
For more detailed information on backup failures and performance issues see Unitrends KB 5062 - Backup Failures and Performance Issues