This error has the following cause and solution:
Either do a NETSETUP or set the SSDIR environment variable.
Setting the SSDIR environment variable tells VSS where to find the SRCSAFE.INI file for the VSS server installation to which you want to connect. Do this by typing the following at the MS-DOS prompt:
set ssdir=\\server\share\vss
Where \\server\share\vss is the folder where the srcsafe.ini file is located.
Note Do not put a space between the equal sign and the location of the VSS server installation. The following will not work: set ssdir= \\server\share\vss.