We've done both. For our corporate site, we designed it and for our product site, we went to an outside designer. We're getting ready to redesign our corporate site again, and I think this time we'll definitely look to outside help.
The reason isn't that we can't handle it (we're a web design and development firm), but because there are several immediate, key advantages gained by going with an outsider:
1. It doesn't come second to other client/product work. When doing the site for ourselves, it takes 3x as long, because we'll push it off when a new client project comes in or we need to make enhancements to our product. By hiring someone we avoid this conflict.
2. It's important to get an outside perspective. We're so ingrained in the day to day that we can lose site of how to present ourselves to our customers. Things that may seem really important to us may not matter at all to people shopping for web dev. A good designer is able to look past our subjectiveness and come up with a design that meets our consumers needs.
3. You care more when you're paying someone. When we do it ourselves, we often say "well, that's good enough for now, we can tighten it up later" -- later almost never comes. When you're paying someone $5,000 out of your pocket, you'll make sure they hit the nail on the head the first time and be more willing to critique them than your own team.