Nate Voss' blog, Vossome 2.1, has an excellent article about why it is a bad idea to go on the cheap when designing your company's logo. The word directly from the designer's mouth, er, keyboard:
In a Troubled Economy, Why Logo Design Contests and Crowdsourcing Can Do More Harm Than Good.
Read my Feb 19, 2009 blog post, Logo Design Contests Are Bad Design, Bad Service, Bad Business Model.