Just posting this here in case anyone else is having this issue. Have logged calls with Sophos and Syncplicity Support.
I have Windows 7 and 10 machines here that loop through the Update Now checks and parts 1 to 5, check and report nothing new to download and the Part 6 “Updating Sophos System Protection” just says “could not contact server” and leaves the red X in the Sophos Tray Icon & logs lots of things, as below.
After much troubleshooting it appears to be caused by Syncplicity 5.3.0.14656 and more specifically it's "SyncDrive" feature. Removing Syncplicity completely and the problem goes away, reinstall it with SyncDrive Off and it starts working, reinstall it with SyncDrive on and it fails to update again. I tried white listing a number of Syncplicity files from on-access scanning with no success.
It sounds very similar to this: https://community.sophos.com/kb/en-us/121891
The following error can be found in the log 'C:\Windows\Temp\Sophos Anti-Virus Install Log_*txt':
INFO: Checking the validity of the VDL manifest file.
INFO: The manifest file has been successfully validated.
ERROR: Install threw std::exception: FeatureSet(): CoCreateInstance failed
Trace(2018-Jan-10 09:57:24): CIDUpdate(PrimarySuccess):
Trace(2018-Jan-10 09:57:25): CIDUpdateLocation::Prepare... entered
Trace(2018-Jan-10 09:57:25): CheckManifest completed successfully
Trace(2018-Jan-10 09:57:25): CustomFileMap::CustomFileMap. CachePath = C:\ProgramData\Sophos\AutoUpdate\cache
Trace(2018-Jan-10 09:57:25): CustomFileMap::Read: Subfolder = sau productID = {9BF40A4E-23AE-48be-9974-5A1F261DBEE8}
Trace(2018-Jan-10 09:57:25): CustomFileMap::Read: File path = C:\ProgramData\Sophos\AutoUpdate\cache\sau.custom
Trace(2018-Jan-10 09:57:25): CustomFileMap::Read: File exists and appears valid.
Trace(2018-Jan-10 09:57:25): UpdateLocationFacade::SyncProduct: Last Update Mechanism = CID
Trace(2018-Jan-10 09:57:25): CIDUpdateLocation::SyncProduct - Updating Product: Sophos System Protection
Trace(2018-Jan-10 09:57:25): CIDUpdate(SyncProduct.Start): Sophos System Protection, <serverhhere>
Trace(2018-Jan-10 09:57:25): Checksum found in master.upd matches cached cidsync.upd : 59d2646f. Skipping download
Trace(2018-Jan-10 09:57:25): CIDUpdate(PrimarySuccess):
Trace(2018-Jan-10 09:57:26): ALUpdate(DownloadEnded):
Trace(2018-Jan-10 09:57:26): UpdateCoordinator::UpdateNow: About to Action list of products
Trace(2018-Jan-10 09:57:26): SimpleProduct::DoAction isLater==false skipAction==false isUninstall==false m_lastUpdateSucceeded==true numfilestocahce 1 Actiontype SetupNot preinstalled product
Trace(2018-Jan-10 09:57:26): Null update
Trace(2018-Jan-10 09:57:26): ALUpdate(Action.Skipped): RMSNT
Trace(2018-Jan-10 09:57:26): CIDUpdateLocation::OnNullUpdate...
Trace(2018-Jan-10 09:57:26): CustomFileMap::CustomFileMap. CachePath = C:\ProgramData\Sophos\AutoUpdate\cache
Trace(2018-Jan-10 09:57:26): CustomFileMap::Read: Subfolder = rms productID = {390DCDC2-10A9-4ef3-B8D8-0CA7F0E7EB92}
Trace(2018-Jan-10 09:57:26): CustomFileMap::Read: File path = C:\ProgramData\Sophos\AutoUpdate\cache\rms.custom
Trace(2018-Jan-10 09:57:26): CustomFileMap::Read: File exists and appears valid.
Trace(2018-Jan-10 09:57:26): CIDUpdateLocation::OnNullUpdate complete.
Trace(2018-Jan-10 09:57:26): Updating plugin cache for RMSNT
Trace(2018-Jan-10 09:57:26): Successfully updated plugin cache for RMSNT
Trace(2018-Jan-10 09:57:26): SimpleProduct::DoAction isLater==true skipAction==false isUninstall==false m_lastUpdateSucceeded==false numfilestocahce 1 Actiontype SetupNot preinstalled product
Trace(2018-Jan-10 09:57:26): DoAction vaid update and true condition
Trace(2018-Jan-10 09:57:26): SetupAction::Execute: Creating thread to install product SAVXP
Trace(2018-Jan-10 09:57:26): Running setup action thread...
Trace(2018-Jan-10 09:57:26): SetupAction::Run: Installing Product SAVXP
Trace(2018-Jan-10 09:57:26): ALUpdate(Action.Execute): SAVXP
Trace(2018-Jan-10 09:57:26): SetupAction::Run: Preparing...
Trace(2018-Jan-10 09:57:26): CIDUpdateLocation::Prepare... entered
Trace(2018-Jan-10 09:57:26): CheckManifest completed successfully
Trace(2018-Jan-10 09:57:26): CustomFileMap::CustomFileMap. CachePath = C:\ProgramData\Sophos\AutoUpdate\cache
Trace(2018-Jan-10 09:57:26): CustomFileMap::Read: Subfolder = savxp productID = {E17FE03B-0501-4aaa-BC69-0129D965F311}
Trace(2018-Jan-10 09:57:26): CustomFileMap::Read: File path = C:\ProgramData\Sophos\AutoUpdate\cache\savxp.custom
Trace(2018-Jan-10 09:57:26): CustomFileMap::Read: File exists and appears valid.
Trace(2018-Jan-10 09:57:26): SetupAction::Run: Prepare succeeded
Trace(2018-Jan-10 09:57:26): SetupAction::Execute: Could not create instance of IProductSetup2. Reverting to IProductSetup
Trace(2018-Jan-10 09:57:27): ALUpdate(Install.Failure): SAVXP
Trace(2018-Jan-10 09:57:27): Setup action thread finished with result state 0
Trace(2018-Jan-10 09:57:27): SetupAction::Execute: Thread to install SAVXP returns 0
Trace(2018-Jan-10 09:57:27): SimpleProduct::DoAction isLater==false skipAction==false isUninstall==false m_lastUpdateSucceeded==true numfilestocahce 1 Actiontype SetupNot preinstalled product
Trace(2018-Jan-10 09:57:27): Null update
Trace(2018-Jan-10 09:57:27): ALUpdate(Action.Skipped): Sophos Endpoint Defense
Time: 10/01/2018 8:58:53
Message: *************** Sophos AutoUpdate started ***************
Module: ALUpdate
Process ID: 5932
Thread ID: 5936
Time: 10/01/2018 8:49:36
Message: AutoUpdate finished
Module: ALUpdate
Process ID: 1300
Thread ID: 5804
Time: 10/01/2018 8:49:35
Message: Installation of Sophos System Protection skipped
Module: ALUpdate
Process ID: 1300
Thread ID: 5804
Time: 10/01/2018 8:49:35
Message: Installation of Sophos AutoUpdate skipped
Module: ALUpdate
Process ID: 1300
Thread ID: 5804
Time: 10/01/2018 8:49:35
Message: Installation of Sophos Network Threat Protection skipped
Module: ALUpdate
Process ID: 1300
Thread ID: 5804
Time: 10/01/2018 8:49:35
Message: Installation of Sophos Endpoint Defense skipped
Module: ALUpdate
Process ID: 1300
Thread ID: 5804
Time: 10/01/2018 8:49:35
Message: Installation of product SAVXP failed because of an unexpected error
Module: ALUpdate
Process ID: 1300
Thread ID: 6088
Time: 10/01/2018 8:49:34
Message: Installing Product SAVXP
Module: ALUpdate
Process ID: 1300
Thread ID: 6088
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