Hot-add or LAN free backup job fails with error message An internal error occured during execution, please contact Quest support if the error persists. Error Messag: 2250 - VIX connector error .
Also, if Failover to LAN is selected as one of the backup otpions in the backup job, then job will retry and proceed to failover to network backup (nbd) as last resort. The failover backup will run successfully but as expected it is alot slower than hot-add method of backup.

Reason, free ESXi 4/5 Server is in place. Either vRanger or the target VM in the backup job resides on free ESXi 4/5.
Due VMware advanced transport licensed feature restrictions [ please see below ]; Free ESXi is not supported for backup. Do the following:
Licensing. In vSphere 5.0, the SCSI HotAdd feature is enabled only for vSphere editions Enterprise and higher, which have Hot Add licensing enabled. No separate Hot Add license is available for purchase as an add-on. In vSphere 4.1, Hot Add capability was also allowed in Advanced edition. Therefore, customers with vSphere Essentials or Standard edition who use backup products (including VMware Data Recovery) are not able to perform proxy-based backup, which relies on SCSI HotAdd. Those customers must use alternate transport modes.
http://www.vmware.com/support/developer/vddk/VDDK-500-ReleaseNotes.html