Cannot connect if the database is in another network domain. (4240321)

Cannot connect to database in another domain i.e. when doing schema compare from the Tools menu | Compare | Schema Compare.  

The database can be connected to via Connection Manager, but cannot be connected if the database is in another network domain.

Toad threw the following exception.

Exception: Quest.Shared.MSSQL.SqlConnectionException

Message : A network-related or instance-specific error occurred while establishing a connection to SQL Server. The server was not found or was not accessible. Verify that the instance name is correct and that SQL Server is configured to allow remote connections. (provider: SQL Network Interfaces, error: 26 - Error Locating Server/Instance Specified)

RESOLUTION 1:

Try adding the domain suffix, like mypc.hp.com, in the DNS config in the pc and use only the server name (pc1-cl1) without the domain suffix in Toad.  Please see attachment on how to add the domain suffix in the DNS configuration of the PC.

RESOLUTION 2:

When trying to connect in the compare, set the server field to connect by specifying the ip\database for that server directly.

Some users had to also add the DNS name and IP to their host file for this to work. It is unlcear what the host file is and how this is done.