Agree with the do-it-yourself sentiment. I spent a couple of years responsible for about $2 million in annual search spend. Started off inheriting an agency relationship. They were sloppy, so I did an RFP for a new agency to take over the account.
New agency was better, but ultimately didn't offer enough improvement. So I started managing one segment of the business internally, proved to my company that it wasn't any Olympian task, and the whole thing came in house. As far as I know, four years later, they've grown the internal team and still do it in house.
THe SEM products give you a decent amount of sophistication for planning and controlling your campaign. Agency people may have an additional software layer to use on top of that but you can easily beat the results they offer just by giving a damn about your business. Your rep at an agency Will have many other clients to worry about and can't provide the same commitment as you or an employee.
You might even find this is doable on a part-time basis early on, once you have the campaign dialed in and need to focus on other things. However you sort it out, there are many better approaches than using an agency.