A Windows platform owner may inquire why he or she is unable to update an Out-of-date VMware tools installation using the VMware Tools applet in the system tray. Clicking on the Update Tools button either produces an error similar to Update Tools failed or nothing at all happens.
Although the option to update VMware Tools is generally available via the system tray, the functionality is disabled by default in the VM shell. The solution to the issue can be found in VMware KB 2007298 Updating VMware Tools fails with the error: Update Tools failed. Edit the virtual machine’s vmx file.
Shut down the virtual machine and add the following line to the virtual machine’s .vmx configuration file via Edit Settings | Options | General | Configuration Parameters:
isolation.tools.guestInitiatedUpgrade.disable = “FALSE”
Power on the virtual machine. From this point forward, a VMware Tools update can be successfully performed from within the guest VM.