Symptoms:
Windows OS Virtual Machine, with Storage Spaces configured, quiesced snapshot fails because System Writer is in failed state.

Windows OS Virtual Machine snapshot creation fails when application quiescing is enabled for snapshots.

In the vmware.log file, for this VM, contains the following message, for example:
2018-xx-xxTxx:xx:xx.xxxZ| vcpu-4| I125: Guest: [ warning] [vmvss:vmvss] CVmSnapshotRequestor::CheckWriterStatus():2212: writer System Writer in failed state: res = 0x800423f0, err = 0x1, error =

VMware vSphere ESXi 6.0
VMware vSphere ESXi 6.7
VMware vSphere ESXi 6.5

VMware does not support VSS application quiescing snapshot when VMware virtual disks are managed under Storage Spaces in Windows.

This is expected behavior and no resolution.

Workaround:
Disable VSS application quiescing using VMware Tools:

1. Open the C:\ProgramData\VMware\VMware Tools\Tools.conf file using a text editor.
2. Create the file if it does not exist in the above said location
3. Add these entries to the file:
   
   [vmbackup]
   vss.disableAppQuiescing = true
    
4. Save and close the file.
5. Restart the VMware Tools Service.
   1. Click Start > Run, type services.msc, and click OK.
   2. Right-click the VMware Tools Service and click Restart.