Why am I receiving an error A Volume Shadow Copy Service operation error has occurred: (0x800423f0) in SBS 2011

To identify the cause of this error, initially run a vssadmin list writers from a command (DOS) prompt on the machine after the backup has failed.

Confirm that the SPSearch4 VSS Writer is showing a status like the below:

Writer name: ‘SPSearch4 VSS Writer’
Writer Id: {35500004-0201-0000-0000-0
Writer Instance Id: {6d7435c2-c142-48
State: [8] Failed
 Last error: Inconsistent shadow copy

This is the SharePoint VSS writer and although you may not have SharePoint installed / configured, Windows will need to see the associated VSS writer in a stable state before it will continue with a System Protection job.

To address the status of the writer follow the steps below:

1. Open the command prompt as administrator.
   
2. Go  to C:\Program Files\Common Files\Microsoft Shared\Web Server Extensions\14\BIN
   
3. Execute the following command:
   
   PSConfig.exe -cmd upgrade -inplace b2b -force -cmd applicationcontent -install -cmd installfeatures
   
   After completing the above command restart the server and try to perform the backup operation again.

Please also see http://social.technet.microsoft.com/Forums/en-AU/winserverfiles/thread/920bf71e-be19-49eb-9f2b-ebcf70ad8177 which gives further details regarding this error.