As already mentioned, SCOM can be configured to use a service account to connect to MSSQL instances; not a good idea to use the (default) SYSTEM account.
In SCOM, you need to configure the Agent, the Subscriber, the Subscription, the Authoring Group, and finally the service account.
Then, in each MSSQL instance you want SCOM to monitor, create the Login, and grant the required permissions (such as VIEW SERVER STATE in [master] database).
The entire setup can be scripted, and is part of our installation process. Let's stop using the local SYSTEM account, please!