Subscription is unable to send the email message to mailbox specified in the "To:" field of the "Action" screen of the Subscription Wizard.
Displayed on screen is "Failed to send message".
Shown in the Application Event logs on the MessageStats Server is:
The server rejected the sender address. The server response was: 530 5.7.1 Client was not authenticated
Testing SMTP communication (http://support.microsoft.com/kb/153119) via Telnet also fails with the same Exchange error code 530 5.7.1.
Anonymous Relay or Anonymous Users is not configured on the Receive Connector on the Exchange server with the Hub Transport Role.
Modify the Exchange Receive Connector to allow Anonymous users (Anonymous Relay) or Create a new Receive Connector to only allow anonymous users from a specific server.
Quest Software does not provide support for problems that arise from improper modification of the Exchange Servers Receive Connector. The Receive Connector contains configuration critical to your Exchange Environment. Make note of the configuration before modifying it or adding to it. For more information on the Microsoft Exchange Receive Connector please contact Microsoft Support.
Microsoft TechNet Article to assist:
Additionally an Enhancement Request (TF00326641) has been raised to allow Web Reports Subscriptions to be configured so that SMTP authentication can be used in order to be used in secured SMTP servers
The above article is for Exchange Server 2010, the process may very per Exchange version.