Below are the proper configurations to make OSD works in SCCM.
1. Install WDS
2. Run WDS under Administrative Tools
3. Open the properties of the server and tab to PXE Response Settings. The setting should be 1 or higher.
This means we will not use WDS to respond in any PXE request, instead we will be using SCCM PXE role.
I have installed DHCP in the same server where WDS and SCCM are installed. I was having issue with DHCP PXE when using a separate DHCP server.
Open WDS > Properties of the server > Tab to DHCP. Check both options.
This settings will allow new booted computers to communicate with the SCCM server.

Install the PXE server role and configure the PXE response to zero. This means all PXE request will be handled by SCCM.
Configure the Computer Client Agent. Set a network access account that has read access to SCCM shared folders.
The Interval settings is the number of minutes that client agent will communicate to the SCCM server to check for updates.
Once a new computer is booted in the network it will communicate with the SCCM PXE and will look at the Boot Images.
Make sure that this boot images contains network and storage VISTA drivers.
Administrator can also enable cmd prompt support under boot images options. This allows you to troubleshoot network or storage issue.
Running ipconfig and diskpart commands can check whether the machine have a network or storage detected.
Make sure that the boot images are advertised in all distribution points.

The Operating System Images contains images of reference computers. In this example I have a Windows XP SP3 reference computer.
This is the same image or output file of programs such as Acronis and Norton Ghost.
The task sequence determines the step taken by a booted computer in the network once a PXE request has been received.
The Apply Network Settings should come next after Setup Operating System.
Advertise the task sequence to the desired computer collections.






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