To connect to Microsoft SQL Server using IntegratedSecurity from Denodo Testing Tool, I would suggest you to follow the “Data Sources configuration” section of [Denodo Testing Tool User Manual](https://community.denodo.com/docs/html/document/denodoconnects/7.0/Denodo%20Testing%20Tool%20-%20User%20Manual) to know how to set up the data source in Denodo Testing Tool.
Note: Ensure to pass the property IntegratedSecurity=true in the JDBC database URL and place the SQL driver in <Denodo_Testing_Home>\denodo-testing-tool-(version)\drivers directory.
Also, the error ‘encoding’ usually occurs when the property 'Encoding' which is used for reading the test files is commented(#) or not specified in the “configuration.properties” file under “<DENODO_TESTING_TOOL_HOME>/conf” folder. Hence, I would ensure to uncomment the 'Encoding' property and enter the suitable value.
Additionally, if you still need help and if you are a user with a valid Support account, you may open a Support Case at the Denodo Support Site and the Support Team will help you.
Hope this helps!