Q: How do I upgrade System Center Virtual Machine Manager and App Controller 2012 to SP1?

A: System Center 2012 Virtual Machine Manager (VMM) 2012 SP1 runs only on Windows Server 2012, which means an in-place upgrade of VMM isn't possible. 

Instead, you need to uninstall App Controller and VMM while keeping their SQL Server databases, reinstall the OS as Windows Server 2012, then reinstall VMM and App Controller 2012 SP1 on Server 2012. You must upgrade VMM and App Controller at the same time due to their tight integration.

First, uninstall App Controller via the Programs and Features control panel applet, selecting Microsoft System Center 2012 - App Controller and clicking Uninstall/Change. Ensure the option to Keep the App Controller database and save the encryption keys is selected (see screen shot below), then click Uninstall.

 App Controller Setup Screen 

After you complete that, repeat the uninstall process for Microsoft System Center 2012 Virtual Machine Manager. Select all the VMM features to be removed, including the VMM management server, the VMM console and VMM Self-Service Portal, and click Next. On the database screen, ensure the option to Retain database is enabled (see screen shot below) and click Next. Click Uninstall.

VMM Database Screen

You can now upgrade the OS to Windows Server 2012 or remove the OS from the domain and perform a fresh installation of Windows Server 2012 instead of an upgrade (which is my preference). This will require some extra effort in ensuring all the prerequisites are installed again. 

It will also require extra effort if you don't use a service account and use the local system, as you will need to ensure the new computer account has the right permissions on the VMM and App Controller databases.

You will need the Windows 8 Assessment and Deployment Kit (ADK), which replaces the Windows 7 Windows Automated Installation Kit. The ADK is downloaded from the Microsoft download site. I recommending using the option Download for installation on a separate computer, which will download the source for the ADK to a location of your choice for installation on other machines in the future, rather than downloading from the Internet every time.

On the Windows Server 2012 OS install, ensure you have installed the Deployment Tools and Windows Preinstallation Environment features from the ADK before starting the VMM 2012 SP1 install process. During the install process, make sure you select to use existing database.

You will then be prompted to upgrade it. Select Yes. After VMM is installed, App Controller can be installed. Again, use the existing database.