They use "make vs. buy" decisions like this to teach business decisions and analysis in business school because there are almost always multiple options and no clear choice. Companies bigger than yours use outside SEO sometimes, and companies much smaller use internal SEO. In my company, Palo Alto Software -- which has very good organic placement -- we've done SEO internally for 10 years now because we felt itsmission was critical and we wanted to keep our core competencies in-house. We now have 40 employees, but we had a full-time SEO specialist as an employee before we had 20 employees. Ultimately this depends on how you feel about risk, fixed vs. variable costs, and true expertise. There are no formulas. You have to make this choice for yourself.
Chuck Fuller is senior vice president, business development for Entrepreneur Media and helped found Entrepreneur.com. He has more than 20 years of experience with the company and has developed relationships with companies such Yahoo!, Google, MSN and AOL.