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In fault tolerant software systems, the Level of Decomposition (LoD) where design diversity is applied has a major impact on software system reliability. By disregarding this impact, current fault tolerance techniques are prone to reliability decrease due to the inappropriate application level of design diversity. In this paper, we quantify the effect of the LoD on system reliability during software recomposition when the functionalities of the system are redistributed across its components. We discuss the LoD in fault tolerant software architectures according to three component failure transitions: component failure occurrence, component failure propagation, and component failure impact. We illustrate the component aspects that relate the LoD to each of these failure transitions. Finally, we quantify the effect of the LoD on system reliability according to a series of decomposition and/or merge operations that may occur during software recomposition.