Unauthorized Access Exception on IIS7 virtual directory with proper permissions

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We have a customer with multiple servers. Let's say the important ones are ServerX - their current production web server, ServerY - their share server, and ServerZ - their new web server they are trying to move to. Today, the .net application on ServerX uses an IIS7 virtual directory to point to a share folder on ServerY. I set up ServerZ's IIS virtual directory as exactly as I could to look the same (same Physical Path, Credentials, Logon type). But the Fileupload.SaveAs(...) method keeps failing with the message "System.UnauthorizedAccessException: Access to the path '\[ServerY][Share]\file.png' is denied."

I have checked permissions. Both ServerX and ServerZ's apppool identity is network service. The share was set up with full access to "Everyone." I even specified Network Service and the Credentials account to have access. The folder is not read only and, again, the site running on ServerX operates saves fine.

To add to my confusion, the application on ServerZ can read and open files from the virtual directory. It only has issue when I try to save a new one. And when logged into ServerZ with the Credentials used for the Virtual Directory, I can create/save files.

I should specify two more things:

  • I had to do some work to get ServerZ on Active Directory. Maybe I missed something in that step that would only affect the application?
  • Both ServerY and ServerZ are Server 2012 instances. ServerX is Server 2008.

Let me know if you have any other questions or suggestions. Thank you

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