We've been going for just over ten years, and in all this time we've housed our own servers. Most of the work we do is either on-site at our clients, or back at base but using client hardware. So our own kit has been primarily for training purposes and running things like a Twiki.
However, primarily as a result of the pretty underwhelming experience we've had with so-called "business" grade internet from our local provider, we've decided to move our stuff to a local data center. In fact we took the opportunity to do a much needed upgrade of some core machines, and bought ourselves some Dell rack-mounted servers. We chose CoreNap in Austin. For $400/month we get 1/3 of a 72" cabinet, housed in a secure data center with 24x7 on-site support, heavy-duty a/c, multiply-redundant, clean power supply, and a chunk of bandwidth. So we get to ditch our cable service, UPS, spike protection, and an old rack we'd been using to house our PC towers.
So far so good. Should have done it years ago.