A method and system for determining availability of a software application using Composite Hidden Markov Model (CHMM). The software application is divided into a plurality of layers which are further divided into sub-components. The configurations and dependencies of the sub-components are identified and also the state of the sub-components is determined. The state of the sub-components is represented in CHMM using state space diagram. The failure rate and recovery time of the sub-components is computed using the state space diagram and the respective transition tables are derived from the CHMM to determine the availability of the layers. The availability of the layers is combined to determine the availability of the software application.