Ask HN: Outsource IT or in-house IT?

We are a small company near San Jose, about 40 employees, running both a small manufacturing operation and about half a dozen web facing applications (12 or so servers). I'm the CTO, have a programming background, and am remote (on the east coast) from the company.

We used an IT outsourcing firm for number of years at $4000 a month (which I suspect is WAY below market rate for a dozen production servers, and 50 or so workstations). They covered monitoring the servers and emergency response, server backup, server upgrades, infrastructure consulting, physical phone and network infrastructure, helpdesk, email, and employees' laptops and desktops maintenance. Basically they did everything IT.

The company is getting out of the physical side of the business. It's a little company which has an Indian office which does most of the maintenance remotely. About two years ago they realized that the business doing remote maintenance of servers was a better business for them and focused in on that. So now they are shutting down the physical side of their business to focus on that remote server monitoring, backup, and maintenance.

So now I'm looking at three major options. First use the company for their remote server monitoring and maintenance, and add an IT employee (a jack of all trades type) to handle the physical stuff. Second look for a IT outsourcing firm that probably covers everything that the old company and not use the old company for anything. Third embrace owning more of IT and putting together a network of freelancers who can cover our needs.

Is one of these options a terrible idea? Is one of these options a great idea? Am I leaving out super important details?