As the Internet becomes more virtualized and software-defined, new functionality is introduced in the network core: the distributed resources available in ISP central offices, universal nodes, or datacenter middleboxes can be used to process (e.g., filter, aggregate or duplicate) data. Based on this new networking paradigm, we formulate the Constrained Virtual Steiner Arborescence Problem (CVSAP) which asks for optimal locations to perform in-network processing, in order to jointly minimize processing costs and network traffic while respecting link and node capacities. We prove that CVSAP cannot be approximated (unless NP ⊆ P), and accordingly, develop the exact algorithm VirtuCast to compute optimal solutions to CVSAP. VirtuCast consists of: (1) a compact single-commodity flow Integer Programming (IP) formulation; (2) a flow decomposition algorithm to reconstruct individual routes from the IP solution. The compactness of the IP formulation allows for computing lower bounds even on large instances quickly, speeding up the algorithm significantly. We rigorously prove VirtuCast’s correctness and show its applicability to solve realistically sized instances close to optimality

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