MSSQL defrag/re-index.

After a year or so our programs that rely on MSSQL get slow and sluggish and the CPU stays fairly busy, most of the time around 100%. About once a year our SQL databases get re-indexed by an outside company. Whatever it is they do it does reduce CPU load significantly. They call it re-indexing but we assume what they are doing is defragging the tables. We would like to do this internally so we are not relying on a third party anymore. Would anyone be willing to educate me on what is being done basically and how you can tell if it needs it?

Windows 2008/SQL 2008