I agree with ian. Please see below. It seems like you're upgrading an Oracle ArcSDE geodatabase but using the old connection syntax to do so.
This would be the 10.0 connection syntax used within ArcGIS Desktop 10.1, which should not be used and will cause an upgrade operation to fail:
Here is what it should look like (server/service):
You can also connect using only the service name or only the TNSNAME. Be sure to append the port the instance is listening on if you are not using the default 1521.
Here is the documentation for acceptable connection syntax in ArcGIS Desktop 10.1:
Database connections in ArcGIS for Desktop (10.1)(Oracle section)
http://resources.arcgis.com/en/help/main/10.1/index.html#/Geodatabase_connections_in_ArcGIS_Desktop/002n00000030000000/
Here is the link to NIM084987, that ian shared above:
http://support.esri.com/en/bugs/nimbus/role/beta10_1/TklNMDg0OTg3
As the link suggests, you may also verify you have EZCONNECT enabled in your sqlnet.ora file on the client machine such as NAMES.DIRECTORY_PATH= (TNSNAMES,EZCONNECT).
Please let me know if you have any questions.