A new German project makes Android phones significantly more secure for business communications–this could change the way people use smartphones, entirely. The project, Bizztrust, creates virtual “work phones” on Android smartphones, and employs BlackBerry-style encryption to guarantee secure communications. The new product has the potential to create headaches for Research In Motion (RIM), which uses security as a major selling point for BlackBerrys.

Bizztrust is a modified version of the Android operating system that separates all installed applications into separate “work” and “personal” partitions. Control over apps in the “work” partition is handled by the end user’s corporate IT team, which automatically updates and deletes work apps as needed. All software installed on Bizztrust-enabled Androids is automatically scanned before the user logs on to their company’s network via VPN; if any irregularities are detected, the user will not be able to use compromised apps. Meanwhile, all data transmitted through the “work” virtual phone is automatically encrypted.

The modified Android software will debut on Tuesday, October 11 at the it-sa computer security show in Germany. Bizztrust is the end result of a joint effort by the Fraunhofer trade group and the Center for Advanced Security Research Darmstadt (CASED).

According to CASED’s Ahmad-Reza Sadeghi, the Android mod “significantly improves the security of today’s mobile terminals at no cost to user-friendliness.” Users toggle between their work and personal virtual phones by playing with a touchscreen slider; non-secure personal applications can be installed to their heart’s content.

If Bizztrust ends up becoming a viable product, it could drastically reduce the number of mobile phones people use for work, and e-waste going to landfills. It’s commonplace for corporate and government employees to have separate personal, work, and third-party phones, as any quick Google search demonstrates. The new phones could also include the capability to have separate voice numbers for work and personal use.

The two groups are hoping to monetize Bizztrust by using it as the central component in a full-on Android enterprise security platform. Once on the market, Bizztrust would work in tandem with integrated phone smartcards that would enable additional security measures. Fraunhofer is also working with undisclosed partner companies to create remote access tools that would allow corporate IT staff to install, update, and delete smartphone apps remotely without going through app stores.