Difference between sql agent account logged in as NTLM and UPN?
Microsoft SQL Servers do not allow the use of User Principle Name (UPN) addresses for service accounts.  There is a post from a few years ago in Microsoft Connect and a more recent post:

https://connect.microsoft.com/SQLServer/feedback/details/519008/upn-user-principal-name-as-services-account-name#details

http://www.ryanjadams.com/2014/02/error-authenticating-proxy-sql-and-upns/#axzz2x0igTI3n

Therefore you need to stick with the DOMAIN\USERNAME format for the service accounts.

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